Court File and Parties

Citation: Reichwein v. Reichwein, 2016 ONSC 2252 Court File No.: FC-14-1325-00 Date: 2016-04-01 Superior Court of Justice - Ontario

Re: Sharon Ann Reichwein, Applicant And: Kevin Karl Reichwein and Elizabeth Reichwein, Respondents

Before: The Hon. Mr. Justice J.P.L. McDermot

Counsel: Alison Pengelley, for the Applicant Trevor Owen, for the Respondents

Heard: By written submissions

Costs Endorsement

[1] On January 21, 2016 I heard an all-day motion. The motion was brought by the applicant Sharon Reichwein for a number of heads of relief including a claim for temporary spousal support, an order joining the respondent’s father as a Respondent in this proceeding, documentary disclosure, questioning and certain relief respecting storage of household contents. The respondent Kevin Reichwein did not bring a motion.

[2] As I noted in my Endorsement I was concerned about proportionality. I had suspected that the amount incurred in legal fees for this motion was well in excess value of property in issue. The costs submissions have confirmed this. Mr. Reichwein has incurred $16,000 in costs. Ms. Reichwein has incurred even more; her lawyer’s Bill of Costs not including disbursements (which does not appear to include what must be a sizeable disbursement for the private investigators hired by her) total more than $24,000 inclusive of HST. It is to be noted that the value of the personal property which was the subject matter of the motion (being the husband’s ATV business) was about $13,000.

[3] In the result, I dismissed much of the relief requested by Ms. Reichwein. I dismissed her motion to join Mr. Reichwein’s father as a respondent in this proceeding. I dismissed her motion for a temporary spousal support. I further dismissed her motion for questioning and regarding storage charges. I granted a portion of her requests for disclosure. Certain requests for disclosure were abandoned by her prior to argument of the motion including the request for a full business and income valuation in this matter.

[4] Both parties now ask for costs. Both parties made offers to settle (although the respondent’s offer did not comply with Rule 18). The respondent claims costs on the basis of what he claims to be substantial success in the motion. The applicant claims costs based upon unreasonable conduct by the respondent or alternatively bad faith conduct. Each party requests costs on a substantial recovery basis.

Analysis

[5] I must first determine entitlement to costs. Once this is achieved, I must determine the quantum of costs to be awarded bearing in mind the offers to settle and the amounts in issue in this motion and proceeding.

Entitlement to Costs

[6] As a general rule, under rule 24(1) of the Family Law Rules,[^1] costs follow the event and the successful party is presumed to be entitled to an award of costs. However, I may take into account unreasonable conduct by the party under rule 24(4) and even a successful party may be disentitled to costs by way of unreasonable conduct under that rule. Moreover if I find bad faith on the part of a party, I am mandated to award costs under Rule 24(8); those costs are to be awarded on a full recovery basis. Finally if success is divided I may apportion costs as appropriate: see rule 24(6).

[7] There are two issues to be considered concerning each party’s right to costs:

a) Was either party substantially successful on this motion or was success divided;

b) Was there unreasonable conduct or bad faith conduct on the part of the respondent which disentitled him to costs even if he is found to be the successful party.

(a) Success at the Motion

[8] The applicant acknowledges that success was divided in this motion. The respondent however states that he was substantially successful insofar as he did not bring a motion and the majority of the relief requested by the applicant was dismissed.

[9] The applicant is correct that she achieved some success on the disclosure portions of the motion. This however may only result from the fact that she abandoned certain disclosure relief prior to argument of the motion. She abandoned her claim for a full business and income valuation. She reduced some of the specific requests for credit card statements from both respondents. However I did find that there were defects in disclosure and that Ms. Reichwein was entitled to further and better disclosure in most of the areas canvassed by her. In particular I found that the “expert’s report” regarding the value of the ATVs did not comply with the Rules and I also found that it was unreasonable for Mr. Reichwein to claim that he could not produce the financial statements of the business.

[10] However Ms. Reichwein had only lately moved for an order for spousal support. She also requested an order joining Mr. Reichwein’s father as a respondent in these proceedings notwithstanding medical information which indicated that he was suffering from dementia; the evidence confirmed to me that his joinder as a respondent would not assist either the court or the parties and might very well be harmful to him.

[11] A review of the offers to settle provided by each party gives some clarity as to success. Offers to settle do not only provide for a measure of costs under Rule 18; they also permit a court to determine who won the day.

[12] The applicant made a comprehensive offer to settle. She offered to settle the spousal support issue for $1,900 per month in spousal support as well as an order joining Karl Reichwein as a party. Some but not all of the disclosure contained in the Offer to Settle was granted at the motion.

[13] Mr. Reichwein also offered to settle the motion in a letter from his solicitor. That offer did not comply with the Rules. However that offer was simply for a withdrawal of the motion without costs.

[14] I also must bear in mind the fact that the spousal support issue was only a matter raised lately by the applicant. The major issues in this motion defined themselves at the time of the settlement conference on June 16, 2015 when Olah, J. commented that a great deal of disclosure had yet to be made. Mr. Reichwein was extremely slow in providing that disclosure, only providing the lion’s share shortly prior to the hearing of the motion. Although Ms. Reichwein was unsuccessful on a major issue argued in the motion being spousal support, that was only recently raised in the Notice of Motion served less than a month before the motion was heard in January 2016.

[15] Although more of the heads of relief in the motion were dismissed than were not, in light of the background and in light of the Offers to Settle, I find that success on the motion was essentially divided. This would normally result in an apportionment of costs under rule 24(6).

(b) Unreasonable or Bad Faith Conduct

[16] Ms. Reichwein firstly suggests through her solicitor that Mr. Reichwein’s conduct constitutes bad faith conduct under rule 24(8). As mentioned above, should I find bad faith conduct I am required to award costs on a full recovery basis against the perpetrator of the conduct, with those costs payable immediately.

[17] Ms. Pengelley cites S (C) v. S(C), 2007 20279 (ON SC), [2007] O.J. No. 2164 (S.C.J.) as authority for the proposition that the failure to disclose can be seen as bad faith conduct where the “intent to harm, conceal or deceive” was “only a significant part of the person’s intent.” To put this statement into context, the whole quote must set out which is as follows:

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.

[18] This case follows a number of cases which confirms that for bad faith conduct to exist there must be some malice or ill will. There must be some ulterior motive beyond simple non-compliance with the Rules. In Hendry v. Martins, 2001 O.J. No. 1098 (S.C.J.) Campbell, J. adopted the definition of bad faith from Black’s Law Dictionary 6th ed. (1990):

Bad faith is not simply bad judgment or negligence but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity ... it contemplates a state of mind affirmatively operating with furtive design or ill will.

[19] Blishen J. states in Piskor v. Piskor, 2004 5023 (ON SC), [2004] O.J. No. 796 (S.C.J.) [at para. 9] that bad faith “can be established by the intentional failure to fulfill an agreement in order to achieve an ulterior motive or an intentional breach of a court order with a view to achieving another purpose.”

[20] Ms. Pengelley is also correct that I made a number of comments in my decision concerning the failure of Mr. Reichwein to provide clarity as to his income or his assets. I had commented that he had failed to provide the necessary clarity for a clear picture of his income for support purposes. There was no good reason why the financial statements of the business or ledger statements showing income and receipt were not provided to Ms. Reichwein by way of disclosure. This was combined by ambiguity as to the respondent’s position in the business and his conflicting evidence as to whether he was an employee of the business or actually continuing to run the business he did prior to separation. Although I found that there was a significant reduction in his income which resulted in my conclusion that interim spousal support was not warranted at this motion, this was made without prejudice partly because of the lack of clarity in Mr. Reichwein’s disclosure.

[21] A lack of disclosure alone does not make for bad faith conduct. Mr. Reichwein was careless and negligent in making his disclosure or providing valuations of the chattels that did not comply with the Rules. However this alone is not necessarily bad faith conduct; his somewhat clumsy attempts to transfer the assets to his mother do not prove malicious intent or intent to deceive as defined in the cases above. I do not find the dishonest conduct on the part of Mr. Reichwein or his mother as would be necessary for a finding of bad faith. I therefore do not find bad faith conduct on the part of the respondents.

[22] I do however find that there was unreasonable conduct on the part of the respondents. Mr. Reichwein was the best person able to provide disclosure as to his business income and he did not do so. The evidence provided was ambiguous at best and conflicting at worst. Although perhaps unintentionally, Mr. Reichwein and his mother structured their affairs in a manner which appeared suspicious. As I commented in my Endorsement, were this a matter placed before a trial judge where matters of credibility could be decided, it is very probable that an adverse inference would be drawn against Mr. Reichwein.

[23] As well, major disclosure was only provided by Mr. Reichwein and Elizabeth Reichwein immediately prior to the motion. There were still items which remained undisclosed after those materials were provided. The respondents did not comply with the direction of Olah, J. in filing and serving a notice to produce until after the motion was served. As a result, the conduct of both Mr. Reichwein and Elizabeth Reichwein was unreasonable within the meaning of the Rules.

[24] Although Mr. Reichwein enjoyed some success at the motion, his unreasonable conduct more than makes up for this as I do not believe the motion would have been necessary had he provided the Applicant some small amount of clarity as to his business income. As I mentioned in my Endorsement, it is no use to say that the financial statements of the business were buried in a storage unit when Mr. Reichwein knew that the business income had been put in issue in these proceedings prior to the closing of the sale of the matrimonial home. I therefore find that Ms. Reichwein is entitled to costs of this motion based upon the unreasonable conduct of both respondents in this proceeding.

Quantum of Costs

[25] Ms. Reichwein claims $24,475.80 in costs inclusive of HST. I note that the Bill of Costs does not appear to include disbursements. The significant disbursement in this motion would be the costs of the private investigator which I assume Ms. Reichwein is not claiming in this motion.

[26] As well Ms. Reichwein had claimed costs of the case conference. Those costs were reserved by Olah, J. However Ms. Reichwein did not include in her Bill of Costs of the costs of the case conference either for preparation of the case conference brief or for attendance at the case conference. The costs of the case conference were not quantified by Olah J. Those costs are therefore unknown and cannot be quantified.

[27] Regarding costs of the motion, if Ms. Reichwein and her solicitor are guilty of anything, it is failing to devote the proper amount of resources to this case. The amount of resources and disclosure requested were more appropriate to a more prosperous and complex business than the ATV business operated by the respondent. Largely we are here because Mr. Reichwein and his mother attempted to remove assets and income from the perusal of the court and in determining spousal support; however Ms. Reichwein need not have responded with the full force of the Rules but perhaps could have addressed this in a more reasonable manner.

[28] As well Ms. Reichwein was herself unreasonable in attempting to continue to join Karl Reichwein as a party considering his illness and the lack of benefit to this litigation that his joinder would have brought.

[29] Ms. Reichwein is therefore entitled to costs but only on a partial recovery basis. I find the amount of costs that is claimed for this motion to be excessive as well. $21,660 in lawyers and law clerks’ time is excessive considering what was in issue and the amounts that could reasonably be recovered. As stated by Wildman, J. in Murphy v. Murphy, 2010 CarswellOnt 28616 (S.C.J.) at para. 20:

I am assuming that the decision to spend so much money preparing for this motion was Mr. Sapir's rather than his counsel's. Regardless of the outcome of the case, a client is not entitled to direct vast resources to litigation and expect full reimbursement. When the rules use the term "full recovery costs", there is an implied qualification that the costs incurred must be reasonable. There must be some assessment of the most effective use of resources to present the case, and some attempt to approach the matter in a cost-effective manner.

[30] A more reasonable amount of full recovery costs to be incurred in a motion of this sort would be between $10,000 and $12,000. Based upon this amount I find that Ms. Reichwein is entitled to costs on a partial recovery basis in the amount of $7,500 payable by the Respondents forthwith. These costs are inclusive of HST and disbursements.

McDERMOT J.

Date: April 1, 2016

[^1]: O. Reg. 144/99