Court File and Parties

COURT FILE NO.: FS-11-367261 DATE: 20160531 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Cindy Adler, Applicant AND: Kerry Adler, Respondent

BEFORE: Kiteley J.

COUNSEL: Harold Niman and Donna Wowk, for the Applicant Martha McCarthy and Sarah Young, for the Respondent

HEARD: in writing

Endorsement as to Costs

[1] In an endorsement dated April 12, 2016, I made orders arising from the motion brought on behalf of the Applicant pursuant to s. 12 and s. 40 of the Family Law Act [2016 ONSC 2414]. At paragraph 52, I held as follows:

Counsel will have an opportunity to make written submissions as to costs. I make these observations which I trust will inform counsel in their negotiations to resolve costs or in their submissions as to costs. First, it was reasonable for the Applicant to bring this motion immediately following the second (successful) attempt to adjourn the January 2016 trial date. But for that adjournment, the issues would have been raised at the trial. Second, success has been divided.

[2] At paragraph 61, I established a timetable for written submissions as to costs.

[3] The Applicant asks for full recovery costs in the amount of $59,686.60 or partial recovery costs in the amount of $35,811.96. The Respondent takes the position that the Applicant should be deprived of costs because of divided success and unreasonable conduct.

[4] Rule 24 lists the factors relevant to the amount of costs which includes reasonable or unreasonable behavior by either party, the importance, complexity or difficulty of the issues, the lawyers’ rates, the time properly spent on the case, expenses properly paid or payable and any other relevant matter. Rule 18 provides direction to the court on the impact of offers to settle.

A. Importance, complexity or difficulty

[5] There appears to be consensus that the issues were difficult and complex and the outcome was of considerable importance to both parties.

B. Lawyers’ rates, time spent, expenses paid

[6] The Applicant’s bill of costs includes fees for services as follows: Harold Niman at $820 per hour for almost 16 hours; Donna Wowk at $540 per hour for over 60 hours; Mark DeGroot at $300 per hour for almost 30 hours; and Stephanie Yuen at $300 per hour for 33 hours. The legal fees total $45,634 plus HST of $5,932.42 for a total of $51,566.42. In addition, the bill of costs includes a disbursement for professional fees by Duff & Phelps in the amount of $7,186 together with HST of $934.18 for a total of $8,120.18. Fees and disbursements and HST total $59,686. As indicated above, the Applicant asks for full indemnity costs in the amount of $59,686.60 or partial indemnity costs in the amount of $35,811.96.

[7] In the submissions on behalf of the Respondent, there is no challenge to the content of the Applicant’s bill of costs from which I infer that he accepts the lawyers’ rates, the time properly spent on the case and expenses properly paid for the services of Duff & Phelps.

C. Divided success

[8] At paragraph 1 of the April 12 endorsement, I listed the relief requested as contained in the confirmation form served on the eve of the motion but I referred in paragraphs 4 and 5 to the position taken on behalf of the Respondent that the original motion and subsequent notices of motion was excessive and overreaching. In the costs submissions, a similar point is made namely that the Applicant was not successful in obtaining the broad orders sought in her notice of motion, including the request for orders freezing all of the Respondent’s accounts and the request for disclosure orders that would have allowed virtually unlimited access to the Respondent’s financial records.

[9] As indicated in the April 12 endorsement, the Applicant was successful in establishing that the value of the assets owned by the Respondent at valuation date had been depleted [paragraph 28] and in establishing that the court must impose a remedy that will respond to the need to reduce the harm to which she is exposed [paragraph 51]. The Applicant was successful in obtaining the order at paragraph 55 that the Respondent preserve four specific assets on the conditions set out in paragraphs 56, 57 and 58 as well as the order at paragraphs 53, 54 and 59.

[10] As indicated in the April 12 endorsement, the Respondent was successful in resisting the submission that the depletion of his assets had been caused by his recklessness [paragraph 33]. The Respondent was successful in resisting the order sought in the introduction referred to in paragraph 1 of the April 12 endorsement, which, as indicated in paragraph 48 of the April 12 endorsement, would have had significant impact. Between service of the original notice of motion and the confirmation form, the relief sought on behalf of the Applicant was significantly moderated and in the sense that the Applicant stopped seeking important relief, I find that the Respondent was also successful.

[11] As indicated in paragraph 52 of the April 12 endorsement, success was divided.

[12] The Applicant also asked for an order with respect to s. 7 expenses that she agreed to adjourn and which motion remains outstanding. I do not deal with costs associated with that issue.

D. Conduct of the Applicant and of the Respondent

[13] As indicated above, at paragraph 52 of the April 12 endorsement, I concluded that it was reasonable for the Applicant to have brought the motion immediately following the second (successful) attempt to adjourn the January 2016 trial date. Counsel for the Respondent nonetheless takes the position that the Applicant’s conduct in bringing the motion was unreasonable as demonstrated by the following. The breadth of the original notice of motion unnecessarily increased the costs of litigating the motion. While the Applicant amended her notice of motion including (inappropriately) in her confirmation form, the relief sought remained overbroad and overreaching. The Applicant and her counsel were or should have been aware that the relief sought was unreasonable and would be “catastrophic and untenable” for the Respondent. The Applicant split her case between her initial affidavit and her reply affidavit and included a new claim with respect to s. 7 expenses. Counsel for the Applicant primarily relied on her reply affidavit in submissions on the motion.

[14] In paragraphs 34 to 45 I explained the reasons for concluding that the court should make orders pursuant to s. 12 and s. 40 of the Family Law Act and in paragraphs 46 to 51 I provided the rationale for granting the interim orders reflected in paragraphs 53 to 59. As those paragraphs indicate, the Respondent’s conduct has been unreasonable until recently. Counsel for the Respondent takes the position that his past conduct is not relevant to the issue of costs; rather the court should focus on his behavior with respect to the motion that was adjudicated. I agree that he has acted reasonably in defending the motion and in putting significant time and effort into providing the court with information relevant to its adjudication. I agree that the Respondent’s materials were delivered within a reasonable time frame. I agree that he provided the court with information relevant to the issues, but, as I pointed out in the earlier endorsement at paragraphs 37 to 42, there was significant information that was missing. I do not agree that his past conduct is irrelevant to costs of the motion. It was his past conduct, as reflected in the April 12 endorsement that created the environment in which the Applicant reasonably launched her motion. In the context of what has occurred, or in the case of the Respondent, not occurred, his conduct was unreasonable and her conduct was reasonable. As she gained an understanding of the impact of the originally requested orders, her counsel modified the relief sought. While I found at paragraph 48 the probable impacts on the Respondent, I did not find that the impact would be “catastrophic and untenable”.

[15] The party alleging unreasonable behavior has the burden of proving it on the balance of probabilities. I am not persuaded that the Applicant’s conduct in the pursuit of the motion was unreasonable given the historical conduct of the Respondent that was unreasonable.

[16] In support of her submission as to unreasonable conduct by the Applicant, counsel for the Respondent also takes issue with the timing of the service of the notice of motion and conflict over the arrangements for the hearing of the notice of motion. In my endorsement dated February 4, 2016 I dealt with those issues in the costs order that I made. I do not intend to duplicate the impact by taking those circumstances into consideration as to costs of the motion. Insofar as the more recent timing constraints as outlined in paragraph 13 of the Respondent’s submissions on costs are concerned, I do not consider those circumstances to constitute unreasonable conduct on the part of the Applicant.

E. Offers to settle

[17] The Respondent’s affidavit was sworn March 9 and his financial statement form 13.1 was sworn March 8. His affidavit consisted of 174 paragraphs and included several charts and attached 25 exhibits. On March 15, 2016, counsel for the Applicant received a USB key containing 81 documents. After a review of that material and in anticipation of the hearing of the motion on March 31, 2016, the Applicant served an offer on March 23 that would have resulted in an order as follows:

(a) that the Respondent not by any means whatsoever, dissipate or deplete any assets or property, real and personal, in any jurisdiction, in which he may have a direct or indirect, legal or beneficial interest, and shall preserve any such assets and property; (b) the balance of the issues in the motion would be adjourned to a date following the combined settlement/trial management conferenced scheduled for April 15, 2016; (c) costs would be determined by the judge hearing the motion.

[18] On the afternoon of March 25, the Applicant’s counsel served another offer which contained these terms:

(a) the Respondent shall not in any way whatsoever remove, transfer encumber, assign, dissipate or deplete the cash, funds in a bank account and gold (all in Switzerland as referred to in paragraph 55 of the earlier endorsement); (b) the motion would be adjourned to a date after the combined settlement/trial management conference scheduled for April 15; (c) costs would be adjourned to the judge hearing the motion.

[19] At about 9:00 p.m. on March 30 (with the motion returnable March 31), the Respondent served an offer to settle that contained these terms:

(a) pending the trial, he would not remove the cash or the gold bars and would not sell or encumber his interest in Crescent Harbour or Maple Grove; (b) that term could be varied by agreement or court order; (c) the motion with respect to s. 7 expenses would be adjourned to be discussed at the trial management/settlement conference; (d) the balance of the relief sought would be dismissed; (e) costs would be reserved to the judge hearing the motion following written submissions.

[20] As indicated in my endorsement dated March 31, 2016, the motion was adjourned to April 7 so that I could digest the factum that had not come to my attention in advance of the hearing.

[21] Both parties served offers on April 6. I cannot determine the order or the timing of the offers.

[22] The Applicant’s April 6 offer to settle proposed an order that would contain these terms:

(a) the Respondent shall not in any way whatsoever remove, transfer, encumber, assign, dissipate or deplete the cash, funds in a bank account and gold (all in Switzerland) as well as his interest in Maple Grove Cottage and his interest in Crescent Harbour in Stroud; (b) a copy of the court order incorporating the terms set out herein will not be served on any of the Respondent’s financial institutions; (c) the motion with respect to s.7 expenses would be adjourned to the combined settlement/trial management conference on April 15; (d) if the Respondent accepted the offer by midnight on April 6 there would be no costs; with full recovery costs payable by the Respondent if accepted after midnight.

[23] The Respondent’s April 6 offer contained the same terms as his March 30 offer with the additional commitment that he would retain a balance of at least $500,000CAD in his accounts at the bank in Switzerland.

[24] I agree with counsel for the Respondent that the terms of the March 23 offer were so broad as to be incapable of acceptance by the Respondent. I agree that the effect of the March 25 offer was to delay the hearing of the motion. While the proposed order (“shall not in any way whatsoever remove, transfer, encumber, assign, dissipate or deplete”) in the April 6 offer was broader than the operative terms in the endorsement I made, the order I made was equal to and perhaps more favourable than the offer when all the other terms I imposed are considered. On the other hand, the order I made was less favourable to the Respondent than both his offers. Pursuant to rule 18(14) orders made “at least one day before the motion date” attract cost consequences. Since I do not have the timing of delivery, I will not consider the rule as it relates to full recovery of costs from that date. However, pursuant to rule 18(16) all offers to settle are relevant.

[25] I agree with the submission on behalf of the Respondent that the 5 offers demonstrate that both parties were engaged in an effort to settle the motion and in that respect, both were acting reasonably in accordance with rule 24(5)(b).

F. Conclusion

[26] In conclusion, I find as follows:

(a) success was divided in that (a) the Applicant did succeed in obtaining a significant order and (b) the Respondent did succeed in opposing the significant relief sought originally and as amended in the Applicant’s confirmation form; (b) the Respondent acted unreasonably prior to the launching of the motion which meant it was reasonable for the Applicant to bring her motion pursuant to s. 12 and s. 40; (c) neither the Applicant nor the Respondent acted unreasonably in the pursuit of or in opposition to the motion that was launched in early February 2016 and heard on April 7, 2016; (d) both the Applicant and the Respondent acted reasonably in the context of their offers to settle; (e) as indicated in paragraph 24 above, the order I made was equal to and perhaps more favourable than the Applicant’s April 6 offer when all the other terms I imposed are considered; (g) for those reasons, the Applicant should recover costs calculated as all of the disbursements for professional fees which were necessary and appropriate with respect to the finding that the Respondent had depleted his assets; and approximately 50% of the legal fees.

Order

[27] With respect to the motion heard April 7, 2016, the Respondent shall pay to the Applicant costs calculated as follows: disbursements in the amount of $7186 together with HST of 934.18 for a total of $8,120.18; and legal fees in the amount of $24,300 plus HST in the amount of $3,159 for a total of $35,579.

[28] By June 24, 2016, the Respondent shall pay those costs and shall document the payment in accordance with the procedure set out in paragraph 58 of the April 12 endorsement.

Kiteley J. Date: May 31, 2016