COURT FILE NO.: FS-05-3324-00 DATE: 2017 04 20

Superior Court of Justice - Ontario

RE: Olga Webster - and – James Ostapchuk

BEFORE: LeMay J.

COUNSEL: R. Kostyniuk, Counsel for the Applicant D. LaFramboise, Counsel for the Respondent

HEARD: In writing

Costs Endorsement

[1] The parties have been involved in family litigation for more than a decade. The issues have included custody of their daughter, who was one (1) year old when they separated, and has now turned thirteen (13) as well as the valuation of a property that they owned together, and the calculation of the Respondent’s income. This case started in 2005, and there have been approximately twenty-five (25) appearances since that time.

[2] By late 2016, the parties appear to have resolved most issues. In January of this year, the parties were to proceed to trial before me on the issue of the valuation of the property that they owned together as well as perhaps other issues. This property, which was at 1057 Dixie Road in Mississauga, was jointly owned. The Applicant owned 12.5% of the property and the Respondent owned 87.5% of the property.

[3] Ultimately, the parties were able to resolve the remaining issues with a mid-trial pre-trial shortly after outlining their opening positions. They filed comprehensive minutes of settlement a few days later. The only issue that remains is costs for the action, and the parties have agreed to have me determine that issue by way of written submissions.

The Underlying Litigation

[4] The parties, Olga Webster (“the Applicant”) and James Ostapchuk (“the Respondent”) began dating in Marcy of 2002, and began cohabiting in a common law relationship on December 1, 2003. As a result of this relationship, they had a child, Jessica Webster, who was born January 26th, 2004. They also owned the property at 1057 Dixie Road in Mississauga. Significantly for this litigation, the Respondent is self employed as a contractor.

[5] The parties separated in February of 2005, and matrimonial litigation started shortly thereafter. Based on the review of the file and of the parties submissions, the major issues were as follows:

a) Income of the Respondent. The Applicant alleges that the Respondent had significant unreported income as a contractor. The Respondent has claimed that his income is limited. b) Custody, access and support. Originally, it appears as if the Respondent alleged that Jessica was not his child. Paternity testing was ordered and it demonstrated that the child was the Respondent’s. c) In terms of support, the income of the Respondent was a key issue in terms of determining the quantum of child support once entitlement was established. d) The valuation of the property at 1057 Dixie Road, and the disposition of that property.

[6] In addition, the litigation moved slowly as a result of the fact that a number of production orders that were made, and the fact that the Respondent had seven different lawyers in this case, and was self-represented during parts of the litigation. It is not clear to me that the production orders were complied with by the Respondent.

[7] The litigation was ultimately resolved by way of minutes of settlement in January of this year, and I directed the parties to file written costs submissions. I provided a timetable and page limits. I would note that both counsel exceeded the page limits that I set out in my endorsement for the reply submissions. Counsel are reminded that the Court expects its directions to be followed.

The Positions of the Parties

[8] The Applicant seeks full indemnity costs in the sum of $141,489.86, inclusive of GST/HST and disbursements. She seeks these costs based on the conduct of the Respondent, and specifically the following:

a) Although the Respondent has had limited interest in engaging with their daughter, the Respondent has refused to consent to a final Custody order, making it more difficult and costly for the Applicant to travel with the daughter. b) Throughout the course of this litigation the Respondent failed to comply with Court orders relating to disclosure, resulting in a significant number of additional court appearances. c) The Respondent intentionally damaged the property at 1057 Dixie Road in order to reduce the value of the property so he owed the Applicant less money. d) There were a number of adjournments that resulted from the Applicant’s change of counsel, including the adjournment of a trial back in 2015.

[9] The Respondent takes the position that he should be entitled to substantial indemnity costs in the sum of $18,590.76, less the outstanding amounts for costs that the Respondent currently owes to the Applicant. The Respondent advances the following arguments in support of this position:

a) The parties ended up closer to the Respondent’s position on the value of the Dixie Road house, as well as his income. As a result, he claims to have been more successful, and therefore entitled to costs. b) The Respondent provided offers to settle that were reasonable in light of the final outcome and should entitle him to costs. c) The Respondent was self-represented in this case and acted in good faith throughout it. d) The Applicant wasted significant time in trying to prove his income was higher than the $30,000.00 ultimately agreed to by the parties.

[10] In the Applicant’s reply submissions, she points out a number of alleged inaccuracies in the Respondent’s submissions, disputes the Respondent’s assertions as to the value of the Dixie Road house, and alleges that the Respondent has the ability to pay the costs she is seeking.

[11] In the Respondent’s reply submissions, he challenges the Applicant’s assertion that she was more successful in this case. The Respondent also challenges the quantum of costs claimed by the Applicant on the basis that the amount of work performed by Applicant’s counsel was excessive.

[12] Both parties also made allegations that the other engaged in abusive conduct during the course of the relationship, including physical abuse. There is no evidence before me to support either party’s assertion of domestic violence, and I will not be considering this issue further.

Analysis

a) Legal Principles

[13] The parties filed a number of cases in support of their positions. Although they did not specifically reference any of this case law in their submissions, they highlighted the relevant passages for my consideration. I have reviewed the case law, and the Family Law Rules on costs in reaching my conclusions in this case.

[14] I start by noting the decision in Serra v. Serra, 2009 ONCA 395, where the Court of Appeal stated that modern costs rules were designed to foster three fundamental purposes:

a) To partially indemnify successful litigants for the cost of litigation; b) To encourage settlement; and c) To discourage and sanction inappropriate behaviour by litigants

[15] It is more difficult to apply these principles in a case where the parties have resolved all of the issues except the question of costs. In particular, it is difficult to identify a successful litigant when there is a settlement. Parties will often compromise their positions in order to obtain a settlement, and will accept less (sometimes significantly less) than they would have been entitled to if the matter had gone to trial.

[16] However, my consideration of the appropriate costs in this case will be governed by those principles, and by the following specific sections of the Rules:

a) Rule 24(6) provides that, in assessing the reasonableness of a party’s conduct, I must consider their behaviour at the time the issue arose, the reasonableness of any offer that they made, and any offers that were withdrawn or rejected. b) Rule 24(8) provides that, if a party acted in bad faith, then the Court shall decide costs on a full recovery basis, and shall order the party to pay them immediately. c) Rule 24(11) provides that the Court shall consider a number of different factors in assessing the costs of a motion or action. In my analysis, I will review the most relevant of those factors: the complexity of the issues, the reasonableness of each party’s conduct, and the time properly spent on the case.

[17] Finally, I note that in family law cases, the Court retains a residual jurisdiction to decide the liability and quantum of costs. In other words, regardless of the specific words set out in the Family Law Rules, I have the jurisdiction to make a cost award that is proportional, and takes the circumstances of this case into account (see Goryn v. Neisner, 2015 ONCJ 318 at paragraph 42).

b) Application of the Principles

Conduct of the Parties

[18] I start by noting that the Respondent has failed to pay costs previously ordered in the sum of $5,850.00. I also note that $1,500.00 of these costs, which were ordered to be paid within thirty days by Seppi J. on August 19th, 2014, have been due and owing for two and a half years. A further amount of costs was ordered by Gray J. and has been outstanding for years. The remaining costs I ordered in October of 2016 to be paid within one hundred and twenty days. These costs are also overdue.

[19] As a result of the Respondent’s failure to pay costs I conclude that the Respondent is unwilling to follow the Court’s directions and may be delaying the Court proceedings. This is a factor that supports an award of costs in the Applicant’s favour.

[20] This brings me to the question of who dragged out these proceedings and who behaved unreasonably. Each side says the other side dragged the proceedings out. It is difficult to make a determination of who is more correct on this issue, as there was no actual trial. For example, it is difficult for me to know the full extent to which the Respondent failed to comply with Court orders relating to disclosure without having either heard a trial or received substantial documentary briefs from both parties.

[21] However, there are some clues from which I can gain a sense as to which party was more reasonable. First, and foremost, the failure to pay costs ordered for a period of two and a half years suggests that the Respondent was behaving unreasonably in this litigation, and was ignoring the Applicant’s requests and the Court’s Orders. This is a factor that favours an award of costs in the Applicant’s favour.

[22] Second, the previous endorsements of my colleagues provide me with some evidence in this regard. From those endorsements, I conclude that disclosure remained a problem and that the Respondent was not properly and completely complying with the disclosure orders that the Court made on numerous occasions. As a result, this is a factor that supports an award of costs in the Applicant’s favour.

[23] Third there is the Respondent’s history of representation. While it is not completely clear what the cause of all of the delays were, the Respondent using seven (7) different lawyers certainly contributed to the delays in this case. Certainly the adjournment of the trial from May of 2015 to January of 2017 was necessitated by the Respondent’s retention of new counsel. This is a factor that suggests an award of costs in the Applicant’s favour, as a portion of the costs in this case will have been incurred because of the Respondent’s need for an adjournment.

[24] The Applicant argues that the Respondent acted in bad faith and, as a result, the Applicant is claiming costs on a full recovery basis. In part, the Applicant points to the Respondent’s failure to disclose documents and the delays in this case. I reject the Applicant’s position on this issue.

[25] I start with the decision in Bulman v. Bulman, 76 R.F.L. (6th) 112 (Ont. S.C.J.). In that case, the Court was faced with a long term marriage, where the wife had suffered significant financial hardship as a result of the separation. After an application was heard in its entirety, the Court made a final Order including full indemnity costs. The full indemnity costs were awarded because of the husband’s “blatant disregard” for the family law system.

[26] The case before me is different in a number of material respects. First, I do not have the advantage of having heard all of the evidence. As a result, it is much more difficult for me to ascertain whether either party has behaved in a bad faith manner. Second, there was an agreement in the case before me to resolve all of the matters, and it is clear (as I discuss below) that this agreement required some compromise from both parties. In a case where the parties resolve all of the issues except for costs on a mutually satisfactory basis, it will generally be very difficult for either party to establish bad faith.

[27] This is particularly true because there is a very high onus for parties to satisfy in order to establish that a party has behaved in a bad faith manner. On this point, see the discussion in O’Brien v. O’Brien, 2017 ONSC 402 at paragraph 14. This case simply does not rise to that high standard, on either side.

[28] Although the conduct of the Respondent does not rise to the level of bad faith, it justifies some level of costs award against the Respondent.

Offers to Settle and Success of the Parties

[29] I have set out above my concerns about attempting to identify a “successful” or “more successful” party in a case where the parties have resolved all of the issues except for costs in a mutually satisfactory way. In addition to the comments I have made above, I note that there will be circumstances where one party or the other has clearly conceded a position that was improperly held at the last moment, and it will therefore be obvious who was successful in the negotiations and who would have been successful at trial. Those are not the facts before me. There is no clear evidence before me of either the value of the property or of the income of the Respondent.

[30] This brings me to the question of offers to settle. Neither party provided me with offers to settle that dealt with the entire action. The Respondent relied on an offer to settle served on January 18th, 2017 that addressed the issues of retroactive child support and section 7 expenses. The Respondent argues that he was successful in the agreement in having the Applicant accept his offer and that this fact supports an award of costs in the Respondent’s favour.

[31] I reject the Respondent’s assertions about his offer for three reasons. First, it was only served the day before trial. As a result, it is relatively meaningless in assessing the past conduct of the parties and the past costs, as portions of the offer were accepted within hours of the offer being made. Second, the Offer does not tell me anything about what the positions of the parties were prior to the offer being made. Finally, the offer does not address all of the issues that were outstanding between the parties at the commencement of trial. As a result, I view the Respondent’s January 18th, 2017 offer as being of very limited assistance in assessing who should pay costs in this case.

[32] Given the fact that there are no comprehensive offers in this case, and given the concerns that I have about trying to apportion success in a case where the parties have reached a resolution, this factor does not favour either party.

Importance and Complexity of the Issues

[33] In this case, the issues were of moderate importance and had some complexity to them. In particular, it would have been important for the Applicant to have a proper income number fixed for the Respondent as this can make a very significant difference to child support. Further, determining the income for support purposes of someone who is self-employed is always a complex endeavour, often requiring the consideration of a significant amount of documentation. This factor suggests that the costs of the action, and therefore the costs awarded, should be somewhat higher in this case.

[34] I also note that, with respect to the 1057 Dixie Road property, the Respondent obtained a result that he would not have been able to obtain at trial. Specifically, he obtained the right to purchase the Applicant’s interest in the property for a fixed price. The property was jointly owned. As a result, if this matter gone to trial, then the only Order that the Court could have made was partition and sale under the Partition Act. The fact that the Applicant was willing to forego her rights to partition and sale in order to resolve this matter indicates that the Applicant was behaving reasonably in the efforts to resolve the case.

[35] This factor supports an award of costs in favour of the Applicant.

Reasonable Expectations of the Parties

[36] Then there is the question of the reasonable expectation of the parties. As set out in Rule 24(11)(d), this factor considers the time properly spent on the case. I start by rejecting the Respondent’s assertion that a reasonable amount of the costs incurred in this case would be $18,000.00 or even the $28,000.00 that he actually spent. The Respondent was self-represented for long periods of time, and it was the Applicant’s counsel who was chasing the Respondent for disclosure. The Applicant also had to push the Respondent to participate in the litigation.

[37] As a result, it would be reasonable to expect that the Respondent would pay some costs to the Applicant. The question is the amount of those costs.

Quantum and Payor

[38] In this case, I am of the view that the Respondent should pay the Applicant some costs for the following reasons:

a) The Respondent did not completely comply with disclosure orders made in this case, which resulted in the litigation taking longer and being more costly. b) The Respondent was the source of some of the delays in this case because of his numerous changes in counsel. c) The Respondent has demonstrated his tendency towards unreasonable conduct by failing to pay costs awards ordered by the Court.

[39] However, I am of the view that the Respondent should not pay the Applicant’s full costs, or even the full partial indemnity amount in this case for two reasons. First, and most importantly, the parties compromised on a number of issues, and it would be unreasonable for the Respondent to pay the total costs claimed where there was a mutual compromise.

[40] Second, the amount claimed by the Applicant appears to me to be excessive in the circumstances. While I appreciate that this litigation has been ongoing for a considerable period of time, the issues in this case do not justify a claim of $140,000.00 in legal costs, especially since there have already been costs awards in the amount of nearly $30,000.00 made against the Respondent in this case.

[41] As a result, and taking all of the foregoing into account, I direct that the Respondent shall pay costs to the Applicant in the sum of $40,000.00 inclusive of HST and disbursements within twenty one (21) days of today’s date. These costs are over and above the amounts that have been previously awarded to the Applicant, but remain unpaid.

Order

[42] Based on the foregoing, I order as follows:

a) The Respondent will pay the Applicant costs in the sum of $40,000.00 inclusive of HST and disbursements within sixty (60) days of today’s date.

LeMay J. DATE: April 20, 2017