ONTARIO
SUPERIOR COURT OF JUSTICE
CITATION: McMillen v. McMillen, 2015 ONSC 635
COURT FILE NO.: 97-FA-6021-01
DATE: 20150128
B E T W E E N:
PAUL GEOFFREY McMILLEN
Simon Schneiderman, for the Applicant,
Applicant
- and -
ELIZABETH McMILLEN (a.k.a. ELISHEVA JONASHE)
Mark Wainberg, for the Respondent
Respondent
Esther Lenkinski for Maritza McMillen on the issue of costs of a disclosure motion against Maritza McMillen
HEARD: in writing
MESBUR J
DECISION ON COSTS
[1] Two costs issues remain following the trial of this motion to change. The first is entitlement to and quantum of costs of the motion to change itself, and the second is entitlement to and quantum of costs of the respondent’s motion to compel financial disclosure from the applicant’s wife, Maritza McMillen.
The motion to change trial:
[2] The trial required adjudication of three major issues. The first was whether there had been a material change in circumstances warranting a reduction in spousal support, and if so, to what amount. The second was whether the applicant was responsible for paying cost of living adjustments after his first variation application, and if so, calculating those arrears of payment. The third was the applicant’s responsibility to continue to maintain life insurance to protect his support obligation, and if so, in what amount.
[3] The trial decision determined there had been a material change, and ordered spousal support payments of $2,000 per month commencing October 2013. The trial decision also determined the applicant had had a continued obligation to pay COLA adjustments after the date of the first variation. I found the outstanding COLA arrears came to $78,529 including prejudgment interest. For a number of reasons, I reduced the arrears considerably, and fixed all arrears of spousal support, including cost of living and interest, but net of Mr. McMillen’s overpayment of support, at $40,000.
[4] Last, I ordered Mr. McMillen to maintain $100,000 of life insurance on his life, for as long as he is required to pay spousal support, or until a court order orders otherwise.
[5] I invited the parties to settle the issue of costs. They have been unable to do so. Accordingly, I have received costs submissions from them, as well as from Maritza McMillen in relation to a motion the respondent launched to compel financial disclosure from her.
The legal framework:
[6] Both parties submitted numerous offers to settle the case. I have now received their respective submissions on costs, and reviewed all their submissions and offers in the context of the applicable rule, namely Rule 24 of the Family Law Rules. The relevant portions of the rule read:
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. O. Reg. 114/99, r. 24 (4).
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. O. Reg. 114/99, r. 24 (6).
BAD FAITH
(8) If a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately. O. Reg. 114/99, r. 24 (8).
COSTS TO BE DECIDED AT EACH STEP
(10) Promptly after each step in the case, the judge or other person who dealt with that step shall decide in a summary manner who, if anyone, is entitled to costs, and set the amount of costs.
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. O. Reg. 114/99, r. 24 (11).
[7] Since both parties made settlement offers, I must also consider rule 18(14). It deals with the costs consequences of a failure to accept a settlement offer and says:
A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:
If the offer relates to a motion, it is made at least one day before the motion date.
If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer. O. Reg. 114/99, r. 18 (14).
[8] Rule 18(15) imposes the burden of proof on the party asserting the order is as favourable as or more favourable than his or her offer. Rule 18(16) permits the court to consider any offer to settle in exercising its discretion regarding costs, even if the presumptive provisions of 18(14) do not apply.
Costs of the motion to change:
[9] The first issue to determine is which party is the “successful” party. The applicant’s first submission is that success at trial was divided, and there should be no order as to costs. Alternatively, he suggests the court should apportion costs because of divided success. He claims costs on those issues where he succeeded, and costs in relation to three motions. In the aggregate, he asks for costs of just under $75,000 all inclusive.
[10] As I see it, the respondent did not really take issue with the threshold issue of whether a material change in circumstances had taken place. The real issues for trial were the amount of the reduction, whether the cost of living clause continued to apply after the first variation, whether cost of living should apply to any new award, and the amount of life insurance protection Mr. McMillen should be obliged to maintain. In order to address the issue of costs in this case, it is most helpful to consider the parties’ respective offers.
[11] The respondent suggests that her settlement offers, taken as a whole, were as favourable as or more favourable to the applicant than the result at trial. She seeks partial indemnity costs to the dates of her offers and full recovery costs after that date. She proposes three different scenarios, which, she says, would result in costs awards in her favour ranging from $$99,081 all-inclusive on a partial indemnity basis throughout, to a high of $115,851, again all inclusive, if full recovery fees are awarded for the trial.
[12] The applicant makes much of the issue of taxability/deductibility of the COLA arrears when comparing the parties’ various offers. I did not order payment in full of the accumulated COLA arrears. I discounted the arrears significantly. As I understand it, in those circumstances it is by no means clear that a smaller lump sum in satisfaction of a larger stream of payments would be deductible to Mr. McMillen and taxable to Ms. Jonashe. I see the characterization of the arrears payment in the various offers as taxable or non-taxable as irrelevant. It is always ultimately a matter for CRA to determine, regardless of what the parties call the payment. Effectively, the judgment requires Mr. McMillen to pay a lump sum of $40,000 in settlement of all COLA arrears and interest on the arrears, net of his overpayment of spousal support. It is in this context I consider the parties’ offers.
The respondent’s offers
[13] The respondent made two settlement offers. The first was dated January 20, 2014. It provided:
a) $40,000 as a lump sum, characterized as future support, and not taxable/deductible;
b) $2,000 per month until the earliest of the termination dates set out in the divorce judgment;
c) Life insurance of $100,000 until February 28, 2023;
d) No costs.
e) The offer expired at the commencement of trial.
[14] October 4, 2014, the respondent made another offer. In it, she offered to settle on the following basis:
a) $40,000, taxable to the respondent and deductible to the applicant, on account of COLA arrears;
b) $2,000 per month from December 15, 2014 until the earliest of the termination dates in the divorce judgment;
c) $100,000 of life insurance
[15] The October offer did not revoke the earlier January offer.
[16] The judgment provided for ongoing support of $2,000 per month with effect from October 15, 2012, until one of the termination dates in the divorce judgment; arrears of spousal support, including COLA and interest fixed at $40,000 and life insurance of $100,000 for as long as Ms. Jonashe is entitled to support, or a court order changes the obligation.
[17] As I see it, Ms. Jonashe’s October offer was as favourable as or slightly more favourable to Mr. McMillen than the result at trial, since it would have given Mr. McMillen tax deductibility for the $40,000, while the judgment will not necessarily have that result. Under this offer, Mr. McMillen would not have specifically received the $1,500 credit I gave him for spousal support, but the lump sum included this adjustment. Even if the offer is not identical, I see the offer as clearly entitling Ms. Jonashe to costs, unless Mr. McMillen made an even better offer. He did not.
Mr. McMillen’s offers
[18] In August of 2013, Mr. McMillen offered to settle for $65,000 on account of arrears and COLA, $1,000 per month in spousal support commencing October 1, 2013, and insurance coverage to remain at $100,000, but only for a period of ten years. The judgment requires periodic support of $2,000 per month from October 15, 2012 onward. Thus, the offer on its face provides $12,000 less in periodic support than the judgment to the commencement date in the offer, and $14,000 less than that from the proposed commencement date in the offer to the date of the judgment. From Ms. Jonashe’s point of view, this offer might be viewed as roughly equivalent to the judgment in net dollars to about January of this year ($25,000 less in periodic support, but $25,000 more in lump sum). After that point, however, the periodic support is half what was ordered. This offer has no bearing on costs. In any case, the offer expired September 3, 2013.
[19] The applicant then made another offer the next month. He then offered $100,000 lump sum and periodic support of $1,200 per month. Again, life insurance would remain at $100,000, but only for a period of ten years.
[20] The following month, the applicant withdrew all prior offers. By email dated October 16, 2013 he revised his offer by reducing the lump sum to $60,000 and increasing the spousal support to $1,500 per month, commencing October, 2013. Insurance coverage was to remain at $100,000 for ten years. The offer remained open until October 17, 2013. This offer has no bearing on costs, since it did not remain open at the commencement of trial. In any case, it was clearly not as favourable as the trial judgment.
[21] On May 21, 2014, the applicant made another offer. This time he offered a lump sum of $25,000 and only $1,000 per month, commencing June 1, 2014. Again, insurance was to be $100,000, for a fixed term. This offer expired May 28, 2014. It is less favourable than the result at trial, and also expired. It has no bearing on costs.
[22] On September 3, 2014 the applicant withdrew all prior offers, and made a new offer. This time he proposed a $30,000 lump sum, $1,200 per month (no commencement date is specified) and $100,000 in life insurance to March 12, 2023. The offer was open for acceptance without costs until September 12, 2014, and substantial indemnity costs thereafter to date of acceptance. The offer specifically stated its terms were not severable. Again, as I see it, this offer is not, taken as a whole, more favourable to the respondent than the result at trial.
[23] I say this because the lump sum is lower than what was awarded, the periodic support is significantly less than the judgment, and life insurance is terminable.
[24] The applicant’s last offer is dated November 16, 2014. He offered $65,000 lump sum regarding the COLA claim, $1,600 per month commencing December 15, 2014, life insurance of $100,000 until 2023, and applicant using his best efforts to increase life insurance to $140,000.
[25] Again, when I compare the higher lump sum to the lower periodic payments to the result at trial, I fail to see that this offer is more favourable to the respondent than the result at trial. The trial judgment admittedly provides a lump sum of $25,000 less than this offer. The lower periodic support would offset that difference within about six years. The fact the life insurance would be for a fixed term is also materially less favourable than the judgment. While the offer is certainly better than prior offers, taken as a whole I cannot see it is more favourable to the respondent than the result at trial.
[26] On the basis of the offers, I find the respondent enjoyed success. I also find the respondent has met her onus under rule 18(15). Her offer of October 4, 2014 was as favourable as the outcome at trial. She is entitled to her costs to that date, and full recovery following, unless there is some reason for me to decide otherwise.
[27] The respondent’s lawyer was called to the bar in 1976. His costs outline shows his actual billing rate to his client at $350/hour, and a partial indemnity rate of $300 per hour. Both these rates strike me as reasonable for a lawyer of his seniority. Although I permitted brief reply costs submissions from the applicant, I have not received any. I therefore conclude he does not have a material quarrel with the respondent’s costs outline. That said, I must still closely scrutinize the bill of costs.
[28] The respondent also claims costs for three motions. Maritza McMillen claims costs for one of them as well.
Costs of motions, including Maritza McMillen’s costs
[29] The respondent claims costs of a motion on October 10, 2013. The applicant claims costs for the same motion. The endorsements record contains no endorsement from any motion dated October 10, 2013. I have no idea what the costs disposition was for that motion. Accordingly, I decline to make any costs order for that date.
[30] On June 26, 2014 Moore J. heard the respondent’s motion to compel Maritza McMillen to make financial disclosure. During the course of submissions on the motion, the parties discussed resolution, and agreed to an order in terms of a consent they crafted. Moore J’s endorsement says: “Costs of the motion, including both entitlement and quantum issues for today’s attendance and preparations therefore after the date of my last endorsement (April 15, 2014) are reserved to the trial judge.” He also determined that the amount of Mr. McMillen’s costs for the April 15, 2014 attendance would also be fixed by the trial judge. Moore J determined that Mr. McMillen was entitled to his costs thrown away of that attendance. The respondent Ms. Jonashe was required to pay them.
[31] Mr. McMillen claims costs of $1,954.90 for the April 15, attendance. This strikes me as high for costs thrown away. Generally, costs thrown away will cover the time spent in court on that date, not the preparation for the motion, which can be used on the actual return of the motion. I see from the bill of costs that counsel’s partial indemnity costs for that actual attendance come to $900. That is a reasonable figure. Accordingly, the respondent must pay the applicant $900 for his costs thrown away for the April 15, 2014 attendance.
[32] All the parties, including Maritza McMillen claim entitlement to costs of the June 26, 2014 attendance. Each asserts success on the motion. That suggests to me that each of them enjoyed some success. In these circumstances, it seems to me success was divided. I make no order as to costs of the June 26, 2014 motion.
Conclusion:
[33] The respondent is therefore entitled to her full recovery costs of the trial. The respondent’s counsel docketed 247.7 hours in trial preparation and attendance at trial, including closing submissions. At his actual rate of $350 per hour, the trial costs come to $86,695 plus applicable taxes. I note, however, that applicant’s counsel docketed only 149.46 hours for the same services. As I see it, spending 100 more hours than opposing counsel, particularly when one is defending rather than bearing the evidentiary burden in a case, can only be characterized as “so grossly excessive as to be obvious overkill”[^1]. I would fix the respondent’s counsel’s hours at 190 for the trial at $350 per hour, making the costs for the trial $66,500.
[34] As to pretrial costs, the respondent claims partial indemnity costs for such things as questioning, settlement offers and the like. The respondent’s bill of costs shows 52 hours for those services. The applicant’s shows a total of 56 hours for all these services, in addition to dealing with all correspondence and financial disclosure. Given the hours are similar, I have no difficulty in allowing the respondent’s costs for these service at 52 hours at about 75% of the lawyer’s actual rate as a partial indemnity rate. Accordingly, the respondent shall have partial indemnity costs of $13,500 (rounded) for those services.
[35] As a result, the respondent is entitled to her costs, fixed at $80,000. Since the respondent must pay the applicant’s costs thrown away for the motion in April 2014, fixed at $900, the applicant shall pay the respondent her costs of the application, fixed at $79,100, all inclusive.
MESBUR J
Released: 20150128
[^1]: As stated by Feldman J (as she then was) in Tri-S Investments v. Vong, [1991] O.J. No. 2292 @ page 12