Court File and Parties

OSHAWA COURT FILE NO.: FC-12-40496 DATE: 20160526 ONTARIO SUPERIOR COURT OF JUSTICE FAMILY COURT

BETWEEN:

Herbert Ralf Balsmeier Applicant – and – Najla Yono Balsmeier Respondent

Counsel: B. Siegel, for the Applicant M. Polisuk, for the Respondent

HEARD: By Written Submissions

Decision Re Costs

FRYER, J

1I heard the trial of this matter on May 20, 21, 22, 25, 26 and August 13, 2015. Following receipt of written submissions, my decision was released on February 5, 2016. I asked for costs submissions, the last of which was received on March 18, 2016. This is my decision with respect to costs.

2The trial was the first part of a bifurcated hearing in which I was to determine the validity of a marriage contract executed by the parties. If the contract was upheld, I was then to determine whether spousal support should be paid to the Respondent Wife pursuant to the principles set out in the Supreme Court of Canada decision Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303.

3The Applicant Husband was the successful party at trial in that I upheld the contract and declined to order further spousal support in favour of the Wife.

4The Husband delivered a number of offers to settle. He seeks costs of $95,000 being close to full recovery costs related to the trial pursuant to rr. 18(14) and 24 of the Family Law Rules, O. Reg. 114/99.

5The Wife submits while the Husband was the successful party, r. 18 does not apply and, in any event, the costs sought by the Husband are excessive. She asks the court to consider her poor financial position relative to the Husband.

I. Analysis

6In Serra v. Serra, 2009 ONCA 105, 93 O.R. (3d) 161, the Court of Appeal for Ontario confirmed that modern costs rules are designed to foster three fundamental purposes, namely to partially indemnify successful litigants for the cost of litigation, to encourage settlement and to discourage and sanction inappropriate behaviour by litigants bearing in mind that the awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party.

7As the Ontario Court of Appeal in Forrester v. Dennis, 2016 ONCA 214, stated, at para. 22:

[I]n Berta, at para. 92, citing Biant v. Sagoo (2001), 20 R.F.L. (5th) 284 (Ont. S.C.J.), at para 20, “[T]he preferable approach in family law cases is to have costs recovery generally approach full recovery, so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the result.” ... [A]s articulated in Sordi v. Sordi, 2011 ONCA 665, 283 O.A.C. 287, at para. 21, “In the context of family law disputes, a court need not find special circumstances to make a costs award approaching substantial indemnity” (citation omitted). Therefore the award of substantial indemnity costs is not an improper exercise of discretion.

8The starting point for an analysis of costs is a determination of success with reference to the offers to settle delivered by each party, along with the position that each party took at trial.

1. The Trial Positions

9The Husband’s position at trial was that the marriage contract should be upheld. He would continue to pay spousal support as required by that contract (a total of $216,000 in taxable/deductible support). The Husband sought exclusive possession of his condominium in Florida, as well as occupation rent totalling $79,934.

10The Wife’s position at trial was that the marriage contract should be set aside permitting her to advance a claim for an equalization of property and increased spousal support. In the alternative, if the contract was upheld, she requested additional spousal support of $15,000 per month for three years.

2. The Offers to Settle

11The Husband delivered several offers to settle. Three of the offers appended to his costs submissions pre-dated a reconciliation of the parties and I have not considered them.

12The Husband made two offers after the final separation of the parties. One was dated August 2, 2013 (“the first offer”) and the second dated October 23, 2014 (“the second offer”). The second offer did not explicitly revoke the first offer. However, as set out below, the Husband’s second offer was less favourable to the Wife than his first offer and for this reason, the earlier offer was implicitly withdrawn. See Owen-Lytle v. Lytle, 2015 ONSC 7673, 71 R.F.L. (7th) 364, at para. 25.

13In both offers, the Husband set out terms of proposed settlement that included the payment of spousal support. The Wife had taken up residence in the condominium owned by the Husband in Florida and she refused to leave voluntarily. Both offers required the Wife to vacate the Florida condominium and required her to consent to his having exclusive possession of this and his property in Markham, Ontario.

14In his first offer the Husband gave the Wife two alternatives, one of which was superior to the other, being $250,000 in total lump sum payments contingent on the Wife vacating and granting him exclusive possession of the Florida condominium, among other things. There was no deadline for acceptance.

15In his second offer, made over one year later, the Husband again gave two options. One option was a lump sum payment of $150,000 plus $6,000 per month in periodic spousal support for two months (a total of $12,000 in taxable/deductible support). The second option was for a lump sum of $50,000 with periodic spousal support to continue until October 1, 2016 at the rate of $6,000 per month (a total of $144,000 in taxable/deductible support). The after-tax value of these two options to the Wife would likely be very similar. In both options the Wife was required to vacate the Florida condominium on or before December 31, 2014.

16At the time the second offer was made the Husband had already paid $72,000 in periodic spousal support. However, after taking into account the tax payable by the Wife on the periodic spousal support, his first offer was superior. Therefore, the second offer to settle constitutes an implicit withdrawal of the first.

17The Wife delivered an offer to settle dated May 6, 2016. Her offer was for $15,000 in spousal support payable for 24 months (a total of $360,000 in taxable/deductible support) plus a further $12,000 USD in medical expenses. At the time that the Wife’s offer to settle was made, the Husband had already paid $114,000 in spousal support, bringing the total sought by the Wife to approximately $494,000.

3. Does Rule 18 Apply?

18For the reasons set out below, I find that the Husband’s offer to settle (the second offer) does not meet the criteria under Rule 18.

(a) Was the Husband’s Offer Withdrawn Prior to Trial

19Rule 18(6) states with respect to time-limited offers: “An offer that is not accepted within the time set out in the offer is considered to have been withdrawn.” The terms of the Husband’s second offer to settle were such that the offer to settle was deemed withdrawn prior to trial.

20Although the Husband’s second offer to settle states that it is open for acceptance until trial, the financial benefits to be conferred upon the Wife were contingent on her doing certain things by December 31, 2014. Under both the first and second option, the payments offered to the Wife were contingent on her executing Minutes of Settlement containing comprehensive releases and a dismissal of all claims on or before December 31, 2014. She was required to vacate the Florida condominium on or before December 31, 2014. The inclusion of these terms meant that the Wife could not accept either option under the second offer to settle after December 31, 2014; the offer made no alternative provisions for acceptance after that date. Therefore the second offer to settle was not technically “‘open for acceptance until trial”’. For this reason, the offer was a time-limited one and as it was not accepted by the Wife by the December 31, 2014 deadline, it is deemed withdrawn.

21Even if the offer did not contain time limits and was effectively open for acceptance as of the date of trial, I would find that it did not meet the criteria under Rule 18(14).

22Subrule 18(14) of the Family Law Rules provides that if a party achieves a result at trial superior to his or her offer to settle, that party is entitled to full recovery costs from the date of the offer to settle. In order for r. 18(14) to apply, the offer to settle must be more favourable than the relief sought in all respects. Per r. 18(15), the burden of demonstrating this is on the party seeking the benefit of r. 18(14). There must be strict compliance with the rule: Studerus v. Studerus, 2014 ONSC 2223, 2014 CarswellOnt 4751.

23The second offer to settle contained a condition that the Wife must grant the Husband exclusive possession of the Florida condominium. I declined to grant that relief.

24Furthermore, the Husband included undefined costs consequences if the offer was accepted after November 10, 2014. The inclusion of costs consequences in a final offer is a common and meritorious practice as it encourages parties to settle expeditiously before further legal fees are incurred to advance the case. Even if the offer did not contain a time limit, the inclusion of this costs provision would still make it impossible to determine whether the offer to settle was more favourable than the trial result. As Mitrow J. stated in Studerus v. Studerus at para. 18: “[a] litigant who includes costs consequences in an offer may place at risk his or her ability to rely on r. 18(14).”

(b) Does Rule 18(16) Apply

25As the Husband’s offer was not open at the time of trial, I have not considered it under r. 18(16). As set out below, I have considered it under r. 24(5).

4. Rule 24

(a) The Relative Reasonableness of the Parties’ Behaviour & Position (Rule 24(5) and Rule 24(11)(b))

26On whole, the Husband’s position was more reasonable than the Wife’s. This is reflected in my reasons for judgment.

27Although the Husband’s offer was not open for acceptance at trial, I have considered it along with the Wife’s offer to settle under r. 24(5)(c), which allows the court to examine “any offer the party withdrew or failed to accept.”

28In option #1 of his second offer to settle, the Husband offered a lump sum payment of $150,000 plus a further $12,000 in taxable deductible spousal support. At the time the offer was made, the Husband had already paid $72,000 in taxable deductible support. The value of his offer to settle was therefore $234,000 in spousal support, of which $150,000 was non-taxable to the Wife. Had the Wife accepted the offer within the time limit, she would not have had the benefit of residing in the condominium in Florida.

29The Wife’s first offer was made in a single sentence e-mail from her lawyer on April 23, 2015 that read as follows:

My client is prepared to resolve this case if your client paid to her $500,000 USD, her medical expenses, legal costs, and reimburse her for money she has used to improve the Florida condo.

30Her first formal offer was not made until May 5, 2016 just prior to trial. In this offer she sought an additional $360,000 in spousal support plus $12,000 US in medical fees on top of the $72,000 in spousal support already paid for a total of $432,000 in taxable/deductible spousal support plus $12,000 USD in medical expenses. The Wife allowed no credit for her occupation of the Husband’s condominium in Florida.

31Under my order the amount remaining due to the Wife under the valid marriage contract was offset by the Husband’s claim for occupation rent. She therefore received a total of $168,000 in taxable/deductible spousal support, all comprised of payments made to her prior to my decision. She did have the benefit of residing in the Husband’s condominium up to and through the trial.

32The trial result was closer to the Husband’s offer to settle even if the Wife accepted his offer by the deadline and had not had the benefit of residing in his condominium in Florida.

33The Wife’s position at trial was in several important respects unreasonable. She continued to assert that she had been offered a job at American Express that she gave up to marry the Husband when she knew that she had no evidence to support this claim. Furthermore, the Wife submitted that she suffered from a disability that impaired her ability to work but did not adduce any expert evidence to support this claim. Lastly, the Wife described herself as an experienced businessperson and a tough negotiator, yet she took the position that she had been taken advantage of during the negotiation of the marriage contract.

34On whole the Husband’s position at trial and his position as reflected in his offers to settle was more reasonable than that of the Wife.

(b) Factors in Costs: Rule 24(11)

(i) The Importance, Complexity or Difficulty of the Issues (Rule 24(11)(b))

35The legal issues raised in this trial were not necessarily novel or unique, but, the issue of the validity of the marriage contract is one of general importance.

36The Supreme Court of Canada has held that private agreements are to be given significant weight: Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550. Parties are regularly encouraged to resolve their issues outside the court system.

37However, there are still too many cases brought before the court wherein one party attempts to set aside an otherwise valid contract in the hopes of shaking loose a more favourable resolution from the wealthier party. Such cases frequently involve marriage contracts or cohabitation agreements and have significant negative repercussions. The party who succeeds in having the contract upheld rarely recovers the legal fees expended to defend the contract and this party loses confidence in the sanctity of contract. There is an associated chilling effect on the legal profession wherein family lawyers become increasingly reluctant to assist in negotiating marriage contracts for fear of triggering their professional liability insurance deductible. Lastly, these cases consume valuable court resources. These factors combine to negate the benefits of a private resolution of financial affairs.

38This dynamic was present in this case and I have considered it as part of the quantum of costs awarded.

(ii) The Lawyers’ Rates: Rule 24(11)(c)

39Mr. Siegel’s billing rate is $520 per hour but he charged the Husband $500 per hour for the trial; even the reduced rate is on the higher side for his years of experience. However, the overall amount set out in the bill of costs, $95,000, is not out of line for a trial of six days.

40Both parties presented their case in an expeditious and efficient manner. The advance preparation on behalf of the Husband is appropriately reflected in the bill of costs.

41The Wife asserts that the Husband unnecessarily lengthened the trial by calling witnesses whose evidence did not add to the issues. She further submits that she was then forced to call witnesses to respond. I find that both parties called witnesses who I did not find particularly helpful. The Wife’s three lay witnesses all testified about her alleged health problems in support of her claim for spousal support rather than exclusively in response to evidence given by the Husband’s witnesses. However, the evidence of these witnesses did not take up a significant amount of trial time and this is a neutral issue in my assessment of costs.

42The Wife takes issue with Mr. Siegel charging travel time and suggests the Husband should have selected a lawyer in the community. I do not agree. Litigants in the Newmarket court are frequently represented by lawyers whose practice is located in and around the GTA and it is not inappropriate for a lawyer to charge for his/her travel time.

43The disbursements expended by the Husband are reasonable and appropriate.

44The Wife did not provide me with details of the legal fees incurred by her with respect to this trial in order for me to assess her position with respect to the quantum of fees claimed by the Husband.

(iii) Any other Relevant Matter (Rule 24(11)(f))

45The Husband made reference to positions taken by the parties in closed mediation and to without prejudice comments made by Kaufman J. during a conference. This was highly inappropriate and I have completely disregarded these submissions.

46The Wife submits that I should consider her modest financial means when determining costs and she refers me to C.A.M. v. D.M., 67 O.R. (3d) 181. In that case, the Court of Appeal for Ontario confirmed that the means of the losing party can be considered, particularly when a costs award might have a negative impact on a child or children in the care of that party. This case does not involve custody and access; the Wife has no children. In C.A.M. v. D.M., the Court of Appeal for Ontario noted the mother’s unreasonable behaviour and declined to set aside the costs award.

47I adopt the comments of McGee J. in Mohr v. Sweeney, 2016 ONSC 3238, 2016 CarswellOnt 7716, at para. 17, citing Balaban v. Balaban, 2007 CarswellOnt 1518, at para. 7: “[T]hose who can least afford to litigate should be most motivated to seriously pursue settlement, and avoid unnecessary proceedings.”

48The Wife’s financial position was not a factor in my assessment of costs.

5. Findings re: Costs

49The Wife shall pay the Husband’s costs in the amount of $80,000 inclusive of HST and disbursements. This amount substantially but not completely indemnifies the Husband, the successful party. The Husband did not have an offer to settle that was open for acceptance at trial. However, he made serious and reasonable efforts to settle this matter well before the trial date. The Wife did not deliver an offer to settle until the eve of trial. Her settlement position, particularly prior to her offer dated May 6, 2015, was unreasonable having regard to the circumstances around the execution of the contract but also considering the short length of the marriage. Litigation positions such as the Wife’s should be discouraged and this is also reflected in the quantum of support payable.

II. Order

50The Respondent Wife shall pay costs in the amount of $80,000 inclusive of HST and disbursements to the Applicant Husband within 30 days.

JUSTICE L.E. FRYER

Released: May 26, 2016