ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FS-11-17552
DATE: 20140429
BETWEEN:
SHELLEY LEIGH MURPHY
Applicant
– and –
TIMOTHY LAURENT MURPHY
Respondent
Edwin A. Flak, for the Applicant/Respondent in Appeal
Gary S. Joseph, for the Respondent/Appellant in Appeal
HEARD: In Writing
Perell, J.
REASONS FOR DECISION - COSTS
A. INTRODUCTION AND OVERVIEW
[1] This is a costs award in the appeal by Timothy Laurent Murphy (“Tim”) from the Final Arbitration Award dated July 14, 2011 of Malcolm Kronby, Q.C. in the arbitration between Tim and his former wife Shelley Leigh Murphy (“Shelley”).
[2] For the reasons that follow, I order that there should be no order as to costs.
B. FACTUAL AND PROCEDURAL BACKGROUND
[3] The factual and procedural background is reviewed in my Reasons for Decision reported as Murphy v. Murphy, 2013 ONSC 7015. The following summary of the background shall suffice for the purposes of explaining my decision that there should be no order as to costs.
[4] The Arbitrator made the following awards:
• He ordered that Tim pay Shelley $508,066, being the balance owing from an equalization award of $1,349,069.
• He ordered that the equalization payment bear pre-judgment interest at 4% per annum from April 1, 2004.
• He ordered that for the period from April 1, 2004 to September 30, 2008, Tim pay retroactive child support in the amount of $274,420 plus interest at 4% annually for each year for which child support was payable.
• He ordered that from October 1, 2008, the amount of child support be $4,023 per month less the amount actually paid and without any s. 7 payment under the under the Federal Child Support Guidelines. (Since October 1, 2008, Tim had paid $757 more than $4,023 per month plus s. 7 expenses, but eventually his go-forward monthly payment would be just $4,023.)
• He ordered that Tim pay Shelley a lump sum final spousal support award of $250,000 together with post-judgment interest at 4% from July 14, 2011.
[5] In a costs award released later, the Arbitrator awarded costs and disbursements in the amount of $1,382,675.32 with interest at the rate of 4% annually from July 14, 2011.
[6] After Tim brought a motion for leave to appeal the Arbitrator’s Award, Shelley delivered an offer to settle with respect to the leave motion and the parties at a late hour agreed that leave to appeal should be granted for any questions of law and that leave should be refused for any questions that are not questions of law. Practically speaking, the motion for leave and the appeal itself were argued together.
[7] Tim’s grounds of appeal from the Arbitration Award were as follows:
• The Arbitrators’ award should be set aside because the Arbitrator did not provide adequate reasons.
• The Arbitrator erred in rejecting the uncontradicted expert evidence of James DeBresser with respect to the value of: (a) Tim’s employee stock options (“ESOs”); and (b) his restricted stock units (“RSUs”). (If successful, this ground of appeal would claw back $508,066 from Tim’s equalization payment.)
• The Arbitrator erred in determining Tim’s income for child support purposes, in particular by ignoring the evidence about Tim’s 2009 and 2010 income.
• The Arbitrator erred by not performing a Contino analysis (Contino v. Leonelli-Contino, 2005 SCC 63) pursuant to section 9 of the Federal Child Support Guidelines, and the Arbitrator thus erred in not allowing Tim a setoff for child support.
• The Arbitrator erred by not conducting a DBS support analysis (D.B.S. v. S.R.G., 2006 SCC 37) and by awarding retroactive child support in the amount of $274,420.
• The Arbitrator erred in making the $250,000 lump sum spousal support award.
• The Arbitrator erred in awarding pre-judgment and post-judgment interest.
• The Arbitrator erred in his costs award to Shelley.
[8] Tim’s position was that all of the grounds of appeal were questions of law and that the outcome of the appeal should be that the Arbitrator’s Award be set aside.
[9] By Order dated November 12, 2013, I allowed the appeal with respect to the award for retroactive child support and with respect to the award for lump sum spousal support. In other respects, the appeal was dismissed because either: (a) the issues are issues of fact or mixed fact and law for which there is no right of appeal; or (b) the Arbitrator made no demonstrable error. I ordered that there should be a rehearing of the claim for spousal support. I did not address the costs appeal, which was eventually deferred because the matter was going back to the Arbitrator.
[10] From a financial perspective, subject to the reconsideration of the claim for spousal support, the outcome of the appeal reduced the Arbitrator’s Award by approximately $525,000 (plus an adjustment for interest) and required a reconsideration of the Arbitrator’s Costs Award.
[11] With respect to the appeal of the Arbitrator’s $1,382,675.32 Costs Award, the appeal was never argued. Rather, by endorsement and Order dated December 4, 2013, I set aside the Award and remitted the matter of costs to the Arbitrator for reconsideration in light of the outcome of the appeal and the Arbitrator’s decision about spousal support. I ordered that if there were appeals of the matters remitted to the Arbitrator, I would be seized of the appeals.
[12] I also set aside the Charging Order but made a preservation order of the funds held in trust and permitted a certificate of pending litigation against Tim’s property municipally known as 23 James Walker Court, Markham, Ontario.
C. TIM’S POSITION
[13] Tim requests costs of $24,770.26, all inclusive, which is half of his costs on a partial indemnity scale and $1,500 for his costs submissions for a total of $26,270.26, all inclusive. Or in the alternative, Tim submits that the parties should bear their own costs in light of the divided success on the appeal.
[14] To justify the costs award of $26,270.26, all inclusive, Tim submits that although success was divided on the appeal, when one has regard to the key issues that were decided and the financial value of the adjustments made to the Arbitration Award, he achieved the greater success and thus should recover half of his costs on a partial indemnity scale.
D. SHELLEY’S POSITION
[15] Shelley requests costs of $50,000, all inclusive.
[16] Shelley prepared four separate Bills of Costs; namely: (1) Bill of Costs for $11,690.29, all inclusive, for the leave to appeal motion; (2) Bill of Costs for $38,969.51, all inclusive, for the appeal of the Arbitrator’s Award-Part I (August 12, 2011 to January 13, 2012); (3) Bill of Costs for $31,720.91, all inclusive, for the appeal of the Arbitrator’s Award-Part II (August 2, 2012 to November 13, 2013) and (4) Bill of Costs for $15,567, all inclusive (to date) for the Appeal of the Arbitrator’s Costs Award.
[17] Shelley’s claim for costs of $50,000, all inclusive, is set out and its rationale is summarized in paragraph 37 (in Part IV-Orders Sought) of her written Costs Submissions as follows:
Shelley’s total appeal costs for both appeals were $97,948.66, which is inclusive of taxes and disbursements. Tim did succeed on one ground of his appeal and two grounds of his appeal are being remitted back to the arbitrator. This result may or may not lead to a worse result for Tim than the original award. Shelley respectfully requests that she receive an Order for 80% of 65,000 or $52,000, rounded down to $50,000 in costs of this appeal. The $50,000 requested by Shelley is roughly 51% of her total costs of Tim’s appeal. This amount is well below the midpoint (roughly 73%) between Shelley’s 83.3% success rate on the grounds of the appeal that were adjudicated and Tim’s best-case argument of Shelley’s being 62.5% successful on all grounds of the appeal (including those that were remitted back to the arbitrator for further determination.) The amount of costs Shelley is requesting includes discounts for partial success and a lack of full indemnity.
[18] Shelley submits that although success was “technically divided,” if the court uses a “grounds-based” analysis to apportion success, she will be found to have been highly successful against Tim’s appeal, and, therefore, she should be entitled to an award of costs that reflects her overall success rate of 83% or no lower than 62.5% were Tim’s absolute best-case argument for being successful accepted.
[19] Shelley’s rationales for an optimal 83% success rate or a lowermost success rate of 62.5% are set out in paragraphs 7 and 13 of her Written Submissions as follows:
Shelley was completely successful on five of Tim’s grounds of appeal that Justice Perell decided. Shelley succeeded on the core financial issues concerning equalization and pre- and post-judgment interest issues. Mr. Kronby’s award on these issues totalled $1,349,069 for equalization and $351,500.94 interest on the equalization payment to April 4, 2013, for a total of $1,700,569.94. One ground of appeal, relating to Mr. Kronby’s $250,000 award of spousal support, was referred back to Mr. Kronby for determination. In his endorsement dated December 4, 2013, the Honourable Justice Perell stated “… the matter of costs and the charging order is also remitted to the arbitrator to be reconsidered in light of the outcome of the appeal and his decision regarding spousal support.” As a result, Shelley was successful on five out of six, or 83%, of the grounds of Tim’s appeal that have been fully adjudicated so far.
Tim’s absolute best case argument, which would equate remission back to the Arbitrator with l success (although as demonstrated above, Justice Perell’s decision, may or may not, lead to a worse result for Tim) is that Shelley was successful on five out of eight grounds, which is still a success rate of 62.5%.
[20] Shelley also submits that the costs on child and spousal support issues be referred to the Arbitrator for determination at the same time as he determines spousal support. Further, Shelley submits that the costs of the costs award appeal (which was never argued) should be deferred because it is premature to deal with them.
E. DISCUSSION AND ANALYSIS
1. The Court’s Discretion with respect to Costs
[21] Section 131 of the Courts of Justice Act,[^1] gives the court a broad discretion to deal with costs, including the scale of costs and the recipient of a costs award.
[22] Rule 24 of the Family Law Rules,[^2] addresses costs in family law matters. Rule 24 states:
RULE 24: COSTS
SUCCESSFUL PARTY PRESUMED ENTITLED TO COSTS
- (1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.
SUCCESSFUL PARTY WHO HAS BEHAVED UNREASONABLY
(4) Despite subrule (1), a successful party who has behaved unreasonably during a case may be deprived of all or part of the party’s own costs or ordered to pay all or part of the unsuccessful party’s costs.
DECISION ON REASONABLENESS
(5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,
(a) the party’s behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;
(b) the reasonableness of any offer the party made; and
(c) any offer the party withdrew or failed to accept.
DIVIDED SUCCESS
(6) If success in a step in a case is divided, the court may apportion costs as appropriate.
FACTORS IN COSTS
(11) A person setting the amount of costs shall consider,
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness or unreasonableness of each party’s behaviour in the case;
(c) the lawyer’s rates;
(d) 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;
(e) expenses properly paid or payable; and
(f) any other relevant matter.
[23] The court has a broad discretion to deal with costs, and the overriding principle is that the costs be reasonable having regard the matters in issue and the reasonable expectation of the parties as to their exposure to an adverse costs award.[^3]
[24] Under rule 24 (1), consideration of success is the starting point in awarding costs. However, under rule 24 (6), if success in a step in a case is divided, the court may apportion costs as appropriate.
[25] Divided success is not measured by counting up the issues, assigning a winner, and apportioning success in some mathematical ratio.[^4]
[26] In matters of divided success, the court has the discretion to determine who is the more successful party and award costs just to that party.[^5] However, where success is divided, rather than apportioning costs, it may be appropriate to make no order as to costs.[^6]
2. How to Exercise the Court’s Discretion about Costs in the Circumstances of this Case
[27] How should the court’s discretion about costs be exercised in the circumstances of this case?
[28] I begin the discussion by noting that I see no reason to defer dealing with the parties’ costs claims for: (a) the motion for leave to appeal; (b) the appeal of the Arbitrator’s Award; and (c) the un-argued appeal of the Arbitrator’s Costs Award.
[29] In other words, I disagree with Shelley’s submission that because some discrete issues argued on the appeal were referred back to the Arbitrator, the costs associated with those issues on the appeal should not be addressed.
[30] I am obliged to deal with the matter of the costs of the appeal in their entirety. The motions and the appeals that were before me were resolved substantively, and I did not (nor could I) refer the determination of the costs of the appeal to be decided by the Arbitrator. Deciding the costs of the appeal is the appellate court’s responsibility.
[31] Having read the parties’ submissions and given my own familiarity with what occurred on the appeals, I regard the outcome of the appeals in this case to be a divided success, where the appropriate award should be no order as to costs.
[32] Using different metrics, both parties vigorously asserted that they were the substantially successful party on the appeals. Their submissions simply confirm that substantial success was divided between them.
[33] My own view, which I indicated in my December 4, 2013 endorsement, is that this appeal was a case of divided success. I suppose I could have added that it was a case of divided substantial success, because Tim (the appellant) secured a significant variation of the Arbitrator’s Award. However, he fell far short of his goal, which was to have the Arbitrator’s Award set aside in its entirety, and thus, Shelley (the respondent) also secured a significant victory by preserving much of the Arbitrator’s Award.
F. CONCLUSION
[34] Technically speaking, the appeal was allowed and Tim was the winner but, practically speaking, the appeal was a tie with inconclusive results, and, in my opinion the appropriate award is no award of costs.
Perell, J.
Released: April 29, 2014
COURT FILE NO.: FS-11-17552
DATE: 20140429
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SHELLEY LEIGH MURPHY
Applicant
‑ and ‑
TIMOTHY LAURENT MURPHY
Respondent
REASONS FOR DECISION - COSTS
Perell, J.
Released: April 29, 2014
[^1]: R.S.O. 1990, c. C.43.
[^2]: O. Reg. 114/99.
[^3]: Davies v. Clarington, 2009 ONCA 722; Boucher v. Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
[^4]: Green v. Cook, 2012 ONSC 3731 at para. 12; Brennan v. Brennan, 2002 Carswell Ont. 4152 at para. 3 (S.C.J.).
[^5]: Crisp v. Crisp, 2013 ONSC 4366 (Div. Ct.).
[^6]: Green v. Cook, 2012 ONSC 3731; Schwartz v. Schwartz, 2012 ONCA 239 at para. 70.