SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 2025/13

DATE: 20140904

RE: Michelle Heeley (Applicant/Responding Party)

• And –

David Byers (Respondent/Moving Party)

BEFORE: Justice A. K. Mitchell

COUNSEL: Elli M. Cohen, for the Respondent/Moving Party

David A. Reid, for the Applicant/Responding Party

HEARD: May 21, 2014 at London

E N D O R S E M E N T

[1] This is a motion for leave to appeal the final cost order of the Honourable Justice P.B. Hockin dated August 1, 2013 (the “Costs Order”).

Background Facts

[2] The applicant, Ms. Heeley, commenced these proceedings on May 4, 2011.

[3] The issues in this proceedings included, custody, access, child support, spousal support, and equalization of property.

[4] A trial was scheduled to proceed during the December 2012 trial sittings.

[5] On December 6, 2012 and just prior to trial, Minutes of Settlement were entered into by the parties addressing, on a final basis, all of the issues between them except for the issue of entitlement and quantum of costs of these proceedings.

[6] The terms of the Minutes of Settlement were embodied in the order of Hockin J. made that same day (the “Final Order”).

Filing of Costs Submissions

[7] Pursuant to paragraph 44 of the Final Order, the parties agreed as follows:

Costs to be determined by written submissions of the parties. The Applicant and the Respondent shall make their submissions to the Court on or before January 15, 2013, and the parties may make Reply submissions no later than January 30, 2013.

[8] Despite the timeline for filing costs submissions agreed by the parties, the parties delayed in filing their respective costs submissions until May 14, 2013. Neither counsel advised the court of the parties’ agreement to extend the time for filing costs submissions.

[9] Reply submissions were not filed within 15 days of the filing of the parties’ main submission as contemplated by the Final Order and neither counsel advised the court they still intended to file reply submissions upon the expiration of the 15 day period.

[10] On July 4, 2013, the parties attended before Hockin J. at his request and were advised that their costs submissions filed May 14, 2013 had been stolen from his garage. At the request of Hockin J. further copies of the parties’ costs submissions were filed. Curiously, reply submissions were not filed at this time. One can only presume reply submissions were not yet prepared.

[11] Despite no endorsement to this effect, counsel contend they advised Hockin J. of their intention to file reply submissions by no later than July 12, 2013 during their attendance on July 4, 2013 and that Hockin J. agreed to permit the filing of reply submissions.

[12] On July 8, 2013, the Costs Order was released by Hockin J. No reply submissions had yet been filed by the parties.

[13] The parties contacted the court on that same day and requested permission to file their reply submissions despite the release of the Costs Order. Hockin J. agreed to this request.

[14] The parties delivered their respective reply submissions on July 12, 2013.

[15] Hockin J. released an Addendum to the Costs Order on August 1, 2013 (the “Addendum”)

Cost Submissions

A. Mr. Byers

[16] In his main costs submissions, Mr. Byers requested costs of these proceedings on a full indemnity basis in the amount $105,634.47. This amount is inclusive of legal fees ($73,284.50), disbursements including the cost of the PwC accounting report ($16,290.06), HST ($1,159.91) and costs of the costs submissions ($5000).

[17] Mr. Byers did not include detailed time dockets to support the amount requested.

[18] Mr. Byers argued he was entitled to costs because he had been successful on the majority of issues as evidenced by the terms of various offers made by Mr. Byers compared against the terms of the Final Order.

B. Ms. Heeley

[19] In her main submissions, Ms. Heeley requested costs on a full indemnity basis in the amount of $66,186.02. This amount is inclusive of legal fees ($40,084.03), disbursements including the cost of the BDO accounting report ($21,985.60), and HST ($4,765.35)

[20] Ms. Heeley included detailed time dockets to support the amount requested.

[21] Ms. Heeley argued that she had been successful on the issues of child and spousal support being the most complicated and time consuming of the issues and, therefore, entitled to costs. In addition, Ms. Heeley submitted that Mr. Byers behaved unreasonably with respect to financial disclosure and his position on income which justified an award of costs on a full indemnity basis pursuant to Rule 24(4) of the Family Law Rules.

The Costs Order

[22] The trial judge determined that Ms. Heeley had been successful on the most important and time-consuming of the issues, namely, spousal support and child support and was therefore entitled to fees, disbursements and HST in the amount of $25,000 together with the costs of the BDO accounting report ($19,873.88).

[23] In arriving at his decision, the trial judge considered the applicable Family Law Rules[^1]and applied the test enunciated by Borins J. in Celanese Canada Inc. v. Canadian National Railway Co.[^2] as follows: “whether the amount of costs awarded reflected a fair and reasonable amount that should be paid by the unsuccessful party in the particular proceeding, rather than an amount that reflected the actual costs of the successful party?”

[24] The Costs Order contains, inter alia, the following findings of fact:

[15] The hourly rates claimed are reasonable and justifiable in view of the reasonable complexity of the accounting evidence and the determination of Mr. Byers’ income. As well, I accept that the claims for fees accurately reflect the actual time spent by counsel. I accept as well, the importance of the case to Ms. Heeley and Mr Byers; substantial sums were claimed and important rules on custody, access, parenting and support were settled on a fair and reasonable basis.

[16] In my view, this is a case where success was divided…

[17] …I pause to note that all matters which favour Mr. Byers were not time consuming. They were straight forward positions, not based on complicated facts, which benefitted Mr. Byers because he was consistent from start to finish on his position.

[18] However, there was a great deal of time spent by counsel for Ms. Heeley to ensure proper and wide financial disclosure to instruct her accountant on Mr. Byers’ income. This was the centerpiece of the litigation in terms of time and complexity.(emphasis added)

Reply Submissions

A. Mr. Byers

[25] Mr. Byers filed reply submissions which did not address the main submissions of Ms. Heeley; rather, challenged the findings of fact contained in the Costs Order.

[26] Mr. Byers disputed the finding that Ms. Heeley had been successful on the issues of child and spousal support and that financial disclosure had been time-consuming. For the first time, Mr., Byers included detailed time dockets allocating the time spent by his counsel among the various issues.

[27] In his reply submissions, Mr. Byers argues that there was divided success on the issue of child support and, thus, no award of costs should be made with respect to this issue. This position is different than the position taken by Mr. Byers in his main costs submissions.

B. Ms. Heeley

[28] In her reply submissions, Ms. Heeley responds directly to the facts and position of Mr. Byer’s contained in his main submissions.

The Addendum

[29] The Addendum to the Costs Order confirms the Costs Order with reasons for doing so. In confirming his original decision, Hockin J. states:

[4] A reliable, and informed decision on costs requires a knowledge of the proceeding from a participation in it. The task of deciding which of the parties is entitled to a costs order and the setting of the amount of costs is a difficult one where the case is settled without the court`s involvement. It is doubly difficult where the parties disagree on who has achieved the better result.

[5] I agree with Mr. Reid’s submission at para. 2. of the Reply Submission where he observes that ‘when a matter settles in advance of a trial it is very difficult for the court to deal with disputed facts when dealing with costs.’

[6] Counsel both assert victory was theirs. I understand how they have arrived at their opposing views but I am not prepared for my purpose, to embark on a fact finding process to decide whether it was the applicant or respondent who gathered a better tally sheet.

[7] I make this observation. The applicant’s claim for costs was $40,000 before the accountant. Her recovery is $25,000, including HST. There has been what amounts to a set-off of Mr. Byers’ costs on several issues where he enjoyed success.

[8] The costs order, therefore, will remain unchanged.

Test for Leave to Appeal the Costs Order

[30] The proper forum for this motion for leave to appeal the Costs Order is the Divisional Court.[^3]

[31] Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are strong grounds upon which the appellate court could find that the judge erred in exercising his discretion.[^4]

[32] The Court of Appeal in Duong v. NN Life Insurance Co. of Canada[^5] stated that an appellate court should set aside a costs award on appeal only if the judge has made an error in principle or if the costs award is plainly wrong.

[33] In family law proceedings, the test was enunciated by Aston J. in Johanns v. Fulford[^6] as follows:

Having regard to the parameters of judicial discretion, leave to appeal will be granted if: (a) the discretion is not exercised on the facts of the case; (b) the discretion is exercised on facts wholly unconnected with the cause of action; or (c) the judgment has proceeded on some erroneous principle.

Byers’ Grounds of Appeal

[34] Byers submits that Hockin J. erred in exercising his discretion on numerous grounds, including:

(a) He erred by making specific findings of fact in the endorsement on July 8, 2013 and at the same time on August 1, 2013 stating that he was not making any finds of fact.

(b) He erred in finding as a fact that Heeley spent the vast majority of billable time on determining Byers` income, despite clear evidence to the contrary.

(c) He erred in finding as a fact that Byers spent insignificant time on the 5 of 6 issues that he was successful on, despite clear evidence to the contrary.

(d) He erred in ordering costs against Byers despite finding that Byers was successful on 5 of 6 issues in the litigation.

(e) He erred in ordering that costs be paid to Heeley on a substantial indemnity basis in the face of a settlement and in the absence of behaviour warranting such a level of costs be ordered.

(f) He erred in ordering that costs be paid to Heeley on a substantial indemnity basis given that at best there was divided success on the issue of Byers` income determination;

(g) He erred by failing to explain how he arrived at the quantum of the cost award;

(h) He erred in including costs for Motion, the case Conference, Settlement Conference, Trial Management Conference, aborted set trial date in May 2013 and assignment court attendances;

(i) He erred in ordering Byers to pay the full costs for Heeley`s expert when Byers assertion was uncontroverted that the end result of his income as a collaboration of both parties’ experts;

(j) He erred in ordering Byers to pay the full costs for Heeleys expert when he initially found as a fact that success on the issue of Byers income was divided or that there was no clear winner;

(k) He erred in ordering any costs if no findings of fact were being made as per the Addendum.

(l) He erred in ordering costs that were excessive and unfair given the success that Byers achieved.

(m) He created a reasonable apprehension of bias as a result of releasing a decision in advance of receiving reply submissions.

Analysis

[35] My role as the judge hearing the motion for leave to appeal is not to adjudicate on the merits of the appeal although some consideration of the strength of the various grounds of appeal must be undertaken. As noted in Brad-Jay Investments Ltd. v. Szijjarto, the moving party must establish that there are strong grounds upon which the appellate court could find that Hockin J. erred in exercising his discretion.

[36] Before turning to the specific grounds of appeal raised by Mr. Byers, I wish to comment on the difficult position in which the court was placed when it was called upon to award costs of these proceedings in the face of a settlement on all of the substantive issues between the parties.

[37] Costs rules are designed to promote settlement. Here we have a settlement without any agreement between the parties as to costs. This creates an anomalous situation. The parties want all the benefits that go along with a settlement (i.e., certainty of outcome and cessation of the litigation) without the burden of negotiating an agreement on the issue of entitlement to costs. The court is then left to determine the issue of entitlement largely in a vacuum without the benefit of a proper evidentiary record from which to determine the parties’ respective success on the issues.

[38] Not surprisingly, each party considers itself successful in their own mind with respect to each of the settled issues. Grace J. in Page v. Desabrais[^7] aptly described this conundrum as follows:

My point is simply this: cases are resolved in whole or in part for many reasons. Legal, economic, social, political, emotional, physical or other factors may be wholly or partly at play.

Any attempt to determine a ‘winner’ or ‘loser’ in a settlement is, in most cases, complex if not impossible.

[39] The parties asked Hockin J. to determine the threshold issue of entitlement with both Mr. Byers and Ms. Heeley claiming success or, at the very least, divided success on the issues.

[40] These types of “settlements” should be discouraged. In my view they are not “true” settlements.

[41] Against this backdrop, I will now turn to Mr. Byers’ request for leave to appeal the Costs Order.

[42] The thrust of the appeal is that Mr. Byers was successful on a majority of the issues in the proceedings, and is thus the successful party and entitled to his costs.

[43] On a strictly numbers basis, it would appear that Hockin J. concluded Mr. Byers was successful on the majority of issues. What that accounting exercise fails to recognize is that Hockin J. determined success not by simply tallying success of each party on the issues; rather by considering success relative to the complexity and significance of the particular issue.

[44] Hockin J. concluded that the issues in respect of which Mr. Byers was successful were not time consuming and were straightforward. Conversely, Hockin J. concluded that issues of child and spousal support were time consuming and complicated.

[45] Issues of child and spousal support required significant financial disclosure from Mr. Byers and preparation of accounting reports by BDO and PwC. Those findings of fact are amply supported by the evidence.

[46] These findings of fact are amply supported by the evidence filed by Mr. Byers and Ms. Heeley in their respective submissions.

[47] Mr. Byers further appeals on the basis that the trial judge awarded costs on a substantial indemnity basis without any factual or legal justification.

[48] In determining the appropriate quantum, Hockin J. applied the test as laid out in Celanese Canada Inc. v. Canadian National Railway Co. and exercised his discretion to award an amount that was fair and reasonable in the circumstances. Hockin J. did not award the full amount of costs requested by Ms. Heeley.

[49] When determining what he considered to be a “fair and reasonable” amount, Hockin J. set-off an amount for Mr. Byers’ costs related to the several issues where he enjoyed success.[^8]

[50] The Costs Order reflects partial indemnity recovery on the aggregate fees, HST and disbursements claimed by Ms. Heeley. To that amount Hockin J. added full indemnity recovery for the cost of the accounting report recognizing it as a discrete disbursement relating exclusively to the issues of child and spousal support in respect of which Ms. Heeley was determined to be successful.

[51] On the evidence filed and taking into consideration his findings of success on the various issues, Hockin J. exercised his discretion in awarding an amount he determined was “fair and reasonable”. The quantum of costs awarded meets the test in Johanns v. Fulford.

[52] Mr. Byers further appeals that the Costs Order and the Addendum are in conflict.

[53] In the Costs Order, the trial judge made findings of fact as to the complexity of the various issues and the percentage of the total time each consumed in the proceedings based on the evidence filed by the parties.

[54] From these findings of fact Hockin J. determined which of the parties had been successful on the various issues.

[55] In the Addendum, Hockin J. states that he is not prepared to reconsider his earlier findings or make further findings based on the additional evidence filed by Mr. Byers in his reply submissions.

[56] In my view, Hockin J.’s statement “I am not prepared for my purpose to embark on a fact finding process to decide whether it was the applicant or respondent who gathered a better tally sheet” indicates that Hockin J. did not intend to make further findings of fact with respect to the specific amount of time (and therefore money) spent by each party on each issue.

[57] As noted above, the Costs Order contains findings of fact. Those findings are supported by the evidence filed.

[58] Lastly, Mr. Byers appeals on the basis that the trial judge released the Costs Order prior to receiving the reply submissions thus creating a “reasonable apprehension of bias” on the part of the trial judge.

[59] This basis for appeal is entirely without merit.

[60] The purpose of reply submissions is to respond to any additional issues raised by the opposing party in its submissions. Counsel cannot use the opportunity to bolster their original submissions on issues already addressed in their original costs submissions.

[61] Mr. Byers had an opportunity to put his best foot forward when he filed his submissions on May 14, 2013 including a breakdown of the quantum of costs associated with each step in the proceeding allocated to each of the six issues. He chose not to do so.

[62] Instead, Mr. Byers used his reply submissions as the vehicle by which to respond to the findings of Hockin J. contained in the Costs Order. Mr. Byers was using the opportunity to file additional evidence on issues already addressed in his original submissions realizing (after reading the Costs Order) that the evidentiary record contained in his original submissions had missed the mark. The further evidence filed was available to Mr. Byers when he filed his original costs submissions. Mr. Byers could not “split his case”.

[63] Quite rightly, the trial judge was not prepared to consider this further evidence as the record before him when he made the Costs Order was sufficient to support the findings made as to “success” of the parties on the issues and the complexity of those issues. From these findings, Hockin J. concluded Ms. Heeley was successful on the most complicated and time consuming of the issues.

[64] There is no evidence to establish that Hockin J. did not consider the reply evidence. Regardless, the additional evidence filed by Mr. Byers was not proper reply evidence in any event and should have been disregarded.

[65] It is evident from the reasons set forth in the Addendum that the court was not prepared to embark on an accounting exercise and an allocation of docketed time for purposes of determining the complexity of the issues and whether their resolution was time consuming. That was a proper exercise of discretion.

[66] Did the release of the Costs Order in advance of receipt of reply submissions create a reasonable apprehension of bias? I am of the opinion it did not.

[67] If Mr. Byers believed he was aggrieved by the release of the Costs Order in advance of his filing reply submissions, his remedy was not to ask permission of Hockin J. to file his reply submissions; rather, his remedy was to seek leave to appeal the Costs Order. Mr. Byers could not take a “wait and see approach”.

[68] Once Mr. Byers requested permission to file his reply submissions and was granted permission to do so, he could no longer complain about the timing of the release of the Costs Order.

Disposition

[69] Herman J. considered the application of the test in Johanns v. Fulford in the context of a family proceeding[^9] where success on the issues was divided. In refusing to grant leave to appeal the costs order of Penny J. he stated:

The awarding of costs is a discretionary matter. The determination of who is the more successful party in a case of divided success is a matter of judgment and an exercise of discretion. It was particularly complicated in this case where there were multiple issues, numerous offers to settle, positions which changed over time, and post-trial issues. Whether Mr.Crisp was more successful because he received an overpayment or Ms. Crisp was more successful because the amount ordered was closer to the amount she had proposed, is an exercise of discretion. So too is the decision as to how much weight should be given to the various issues. The trial judge is generally in the best position to weigh these matters in order to determine relative success.

[70] Income and other financial disclosure by the payor parent are critical to a timely resolution of issues of child and spousal support in a family law proceeding. Ample evidence was before Hockin J. to establish Mr. Byers had failed to abide by his obligation to provide timely and full financial disclosure which in turn necessitated the retention of accountants, prevented Ms. Heeley from presenting a meaningful offer to settle until close to the trial date and prevented the accountant from completing its report,

[71] Hockin J. considered the evidence filed by the parties, including offers to settle, and exercised his discretion in favour of Ms. Heeley. There was ample support for the findings that Ms. Heeley had been successful on the issue of child support and spousal support and that those issues were the most time consuming and complicated of the issues between the parties thus entitling Ms. Heeley to an award of costs.

[72] In all of the circumstances, I conclude that the trial judge made no error in principle and did not misapprehend significant or any facts. The Costs Order is not “plainly wrong”.

[73] Mr. Byers has failed to satisfy the test for leave to appeal and, therefore, this motion is dismissed.

[74] The parties agreed that the successful party should receive costs of $5,000. Therefore, Ms. Heeley is entitled to her costs of this motion in the amount of $5,000 inclusive of HST and disbursements.

“Justice A. K. Mitchell”_

Justice A. K. Mitchell

DATE: September 4, 2014

[^1]: Rules 24(1) and 24(6).
[^2]: (2005), 2005 8663 (ON CA), 196 O.A.C. 60 at para.30.
[^3]: Courts of Justice Act, R.S.O.1990, c. c-43, sections 19(1)(a) and 1.2(a) and section 133(b).
[^4]: Brad-Jay Investments Ltd. v. Szijjarto, 2006¸O.J. No. 5078 (C.A.) at para. 21. See also Andriano v. Napa Vallley Plaza Inc. 2011 ONSC 2168, [2011] O.J. No. 1857 (Div. Ct.) at para. 10.
[^5]: (2001), 2001 24151 (ON CA), 141 O.A.C. 307 at para. 14.
[^6]: [2011] O.J. No. 3121 (Ont. S.C.J.) at para. 2.
[^7]: 2012 ONSC 6875, [2012] O.J. No. 5790 (S.C.J.) at paras. 27 and 28.
[^8]: See Addendum at para. 7.
[^9]: Crisp v. Crisp, 2013 ONSC 4366 (Div. Ct.) at para.15.