Schikolenko v. McLellan, 2017 ONSC 7481

minicounsel

COURT FILE NO.: FS-16-0201-00

DATE: 2017-12-13

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Applicant

and -

ROSINA McLELLAN

Respondent

COUNSEL:

Jared Teitel, for the Applicant

Devin Maguire, for the Respondent

Price J.

Costs Endorsement

OVERVIEW

1On January 5, 2017, this Court made an Order, on a motion by Mr. Schikolenko, requiring Ms. McLellan to return the parties’ children from Sarnia, where she had moved them without his consent or an Order of the Court, to Mississauga. The parties were unable to agree on the costs of the motion, so these reasons will address that issue.

BACKGROUND FACTS

2On October 18, 2016, Mr. Schikolenko made a motion for a finding that Rosina McLellan was in contempt of the Order of Brown J. dated October 20, 2015, incorporating the agreement the parties had reached at a mediation on that date, by unilaterally relocating the children from Mississauga, Ontario, to Sarnia, Ontario. He further sought Orders that Ms. McLellan return the children to the residential boundaries described in the 2015 Order, or, alternatively, that the children primarily reside with him.

3Ms. McLellan did not make a Motion to Vary, but when served with Mr. Schikolenko’s motion, made a cross-motion for a temporary Order amending the 2015 Order, and for sole custody of the children and leave, retroactively, to relocate them to Sarnia, where she had already moved with them.

4Although Ms. McLellan was served with Mr. Schikolenko’s motion three weeks before the return date of October 18, 2017, she waited until October 15 to retain counsel and seek an adjournment for the purpose of filing responding material. On November 22, 2016, an Early Case Conference took place where Mr. Schikolenko was granted leave to proceed with his contempt motion.

5Mr. Schikolenko’s contempt motion and Ms. McLellan’s cross-motion were heard on December 23, 2016. This Court made a Final Order at the motion, with reasons issued on January 5, 2017.

ISSES

6The Court must determine whether one of the parties should pay the other’s costs and if so, in what amount.

PARTIES’ POSITIONS

Mr. Shikolenko’s Position

7Mr. Schikolenko relies on his success in the motion and cross-motion, and his presumptive entitlement to costs pursuant to Rule 24(1) of the Family Law Rules. Ms. McLellan was found in contempt, and her cross-motion was dismissed. The Court found that Ms. McLellan had attempted to alienate the children from their father in a manner detrimental to their interests and granted his request that the children reside primarily with him. The Order was made on a final basis, effectively ending this proceeding.

8Mr. Schikolenko seeks to recover costs of between $8,959.76 and $11,198.44, which is to say, on a substantial indemnity or full recovery basis.

Ms. McLellan’s Position

9Ms. McLellan asks the court to take into account the lack of settlement offers, the consequences thereof, and acceptable fees as suggested by the Law Society of Ontario, when determining the amount and type of costs for this matter, if any.

ANALYSIS AND EVIDENCE

1. General Principles

a) Principles to be balanced

10In awarding costs, I must balance two conflicting principles, namely, to indemnify the successful litigant for his cost of enforcing his right to access, and to avoid making potential litigants feel unduly hesitant to defend their rights by requiring them, as unsuccessful litigants, to bear all the costs of the successful party as well as their own.¹ The ultimate objective in balancing these principles is to ensure that the justice system works fairly and efficiently.²

b) Discretion to be exercised

11The entitlement to costs and the appropriate amount to be paid is “within the court’s discretion”.³ The Family Law Rules direct the court as to how its discretion as to costs is to be exercised. Rule 24(1) presumptively entitles a successful party to costs. Although it circumscribes the broad discretion on costs which s. 131(1) of the Courts of Justice Act confers on the court, it does not completely remove a judge’s discretion.⁴ Rules 24(4) and 24(5), for example, state that a successful party may be deprived of costs if he or she has behaved unreasonably.

c) Objectives to be Served

12Indemnification of the successful party is the paramount objective, but not the only one, to be served by a costs order. Other objectives that the court has recognized include encouraging settlement, discouraging frivolous proceedings and unnecessary steps in litigation,⁵ and preserving access to justice.⁶

13Mr. Schikolenko was successful in establishing Ms. McLellan’s contempt of Brown J.’s consent Order and in opposing Ms. McLellan’s motion, after the fact, to vary that Order and ratify the children’s removal. He is therefore presumptively entitled to his costs of the motions.

14Rule 24 of the Family Law Rules provides, in part:

(1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.

(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.

(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.

(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. [Emphasis added]

d) Factors to be Considered

15Rule 24(11) lists the factors that the court should consider in quantifying 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.

1. Importance, Complexity and Difficulty

16The issues in the motions were important to Mr. Schikolenko as they pertained to his relationship with his children. Ms. McLellan withheld the children from him for several months, and relocated them over 250 kilometres from their home in Mississauga to Sarnia without notice to him, let alone his consent.

17The motion was not overly complex, as contempt motions go, but was made more complex than it needed to be by Ms. McLellan’s unfounded allegations of abuse against Mr. Schikolenko.

2. Reasonableness of Each Party’s Behaviour

18Rule 24(4) of the Family Law Rules explicitly authorizes the use of costs orders to express the court’s disapproval of a litigant’s unreasonable conduct. It provides:

24.(4) Despite sub-rule (1) [which provides that a successful party is presumed to be entitled to the costs of a motion], 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. [Emphasis added]

19Rule 24(4) explicitly recognizes the principle that costs may be used to express the court’s disapproval of a litigant’s unreasonable conduct. As noted above, the rule provides that a successful party who has behaved unreasonably during a case may be ordered to pay all or part of the unsuccessful party’s costs.

20Not every instance of unreasonable conduct attracts an order that costs be paid on a higher than partial indemnity scale. Substantial indemnity costs, like their predecessor, solicitor and client costs, are exceptional. Mark M. Orkin, in The Law of Costs, ⁷ cites the Supreme Court of Canada in Young v. Young, (1993). In that case, McLaughlin J., as she then was, stated:

Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. Accordingly, the fact that an application has little merit is no basis for awarding solicitor-client costs.

21It is generally not appropriate to award more than 85 per cent of a successful litigant’s bill, unless the unsuccessful litigant has acted unreasonably or in bad faith, to the extent that censure is appropriate.⁸

22No settlement offers were made between the parties with respect to either the contempt motion or Ms. McLellan’s cross-motion.

23Mr. Schikolenko did not conduct himself unreasonably as to be deprived of the costs to which he is presumptively entitled. Upon Ms. McLellan informing him that “as of right now you will never be seeing the girls again … I am taking away your visitations”, he brought an urgent motion to reinstate his access. Upon learning that Ms. McLellan had relocated the children to Sarnia, he made a motion to have her found in contempt and for the return the children. He consented to an adjournment to enable her to file responding material, notwithstanding that she was served with his material three weeks earlier.

24Ms. McLellan acted unreasonably. The Court found that “Ms. McLellan wilfully relocated the children’s residence to Sarnia, beyond the limit prescribed by the parties’ mediated agreement and Justice Brown’s Order, and that unreasonably curtailed Mr. Schikolenko’s access to the children”. It found that she “was without justification in curtailing Mr. Schikolenko’s access to the children … even after she admits having learned that the [2015 Order] was still in effect”.

25Ms. McLellan alleged abuse against Mr. Schikolenko in an attempt to validate her relocation of the children. The Court found that “the most likely explanation for Ms. McLellan’s allegation of assault is her desire to curtail access and thereby prevent the children from disclosing to their father their impending move to Sarnia, which she had reason to believe Mr. Schikolenko would oppose and attempt to stop”. In doing so, Ms. McLellan acted in bad faith.

26In Nairn v. Lukowski, (2002), and in Piskor v. Piskor, (2004), Blishen J. adopted the definitions of bad faith that the court formulated in Erickson v. Erickson,⁹ (2000), and Hunt v. Hunt, (2001).¹⁰ In those cases, it was held that bad faith could consist of conduct intended to deceive or mislead,¹¹ or of an intentional breach of an agreement or court order in order to achieve an ulterior motive.

27These formulations of bad faith are consistent with the definition set out in Black’s Law Dictionary, 6th ed. (St. Paul, Minn./West Publishing Co., 1990):

Generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation not prompted by an honest mistake as to one’s rights or duties but by some interested or sinister motive. 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 is different from the negative idea of negligence in that it contemplates a state of mind affirmatively operating with furtive design or ill will.¹² [Emphasis added]

28Justice Perkins gave a more extensive explanation of bad faith in S.(C.) v. S.(C.) in 2007:

…The essence of bad faith is the representation that one’s actions are directed toward a particular goal while one’s secret, actual goal is something else, something that is harmful to other persons affected or at least something they will not willingly have supported or tolerated if they had known. However, not all bad faith involves an intent to deceive. It is rare, but not unknown in family cases, for bad faith to be overt – an action carried out with an intent to inflict harm on another person or a person affected by the case without an attempt to conceal the intent.

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. At some point a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behaviour is causing the other party major financial harm without justification.¹³ [Emphasis added]

29Historically, the successful party in a motion made necessary by the responding party’s contempt was entitled to costs on a substantial indemnity scale.¹⁴ This was because a finding of contempt is a finding of unreasonable conduct. Substantial indemnity costs did not follow automatically or invariably from a finding of contempt, but such a finding gave rise to a rebuttable presumption that the successful party was entitled to costs on a substantial indemnity scale. In In Astley v. Verdun, (2013), Goldstein J. described the jurisprudence governing the imposition of substantial indemnity costs as it pertains to contempt, He then stated:

I characterize the test this way: there is a rebuttable presumption that substantial indemnity costs are appropriate in a contempt of court case. The presumption may be rebutted where the contemnor is suitably contrite, has attempted to purge his or her contempt, has taken steps to minimize costs incurred by the other party, and the contempt itself is towards the lower end of the "flagrant and wilful" scale.¹⁵

30The Family Law Rules do not explicitly provide for costs on either a partial or substantial indemnity scale. Rule 18(14), dealing with the costs consequences of a failure to accept an Offer to Settle, instead differentiates between “costs” and “full recovery of costs”. Rule 24(8) also refers to “costs on a full recovery basis,” where a party has acted in bad faith. In a family law case, the court need not find “special circumstances” before ordering costs on a full recovery basis.¹⁶ This leaves a range of costs from nominal to just short of full recovery.

31In Sims-Howarth v Bilcliffe, (2000), Aston J. held that the two traditional scales of costs are no longer an appropriate way to quantify costs under the Family Law Rules.¹⁷ He stated that, having determined that one party is liable to pay costs, the court must fix the amount at some figure between a nominal sum and full recovery, having regard to the factors set out in Rule 24, without any assumptions about categories of costs. This characterization of costs under the Family Law Rules was approved by the Ontario Court of Appeal in C.A.M. v D.M.¹⁸

36More recently, in Berta v. Berta, (2015), the Court of Appeal stated:

In Biant v. Sagoo (2001), 2001 28137 (ON SC), 20 R.F.L. (5th) 284 (Ont. S.C.), the court considered the costs award scheme under the rules and commented, 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. There remains, I believe a discretion under Rule 24(1) to award the amount of costs that appears just in all the circumstances, while giving effect to the rules’ preeminent presumption, and subject always to the rules that require full recovery or that require or suggest a reduction or an apportionment.

This court has repeatedly endorsed the Biant court’s approach to the determination of costs in family law disputes: see for example, Ruffudeen-Coutts v. Coutts, 2012 ONCA 263, 15 R.F.L. (7th) 35, at para. 4; Sordi v Sordi, 2011 ONCA 665, 134 R.F.L. (7th) 197, at para. 21; M. (A.C.) v. M. (D.), 23003), 2003 18880 (ON CA), 67 O.R. (3d) 181 (C.A.), at para. 40. ¹⁹

37Costs must always be proportional to what is at stake in the case, and to the unsuccessful party’s reasonable expectation as to what costs he may face if he is unsuccessful, but unreasonable behavior will, in appropriate circumstances, result in a higher award of costs. In Perri v. Thind et al., (2010), Henderson J. granted leave to appeal to the Divisional Court from a costs award that was a marked departure from the normal or routine costs made in motions court.²⁰ In doing so, he stated that costs orders are not designed mainly to be a punishment. In that case, however, the motion judge had awarded costs four times greater than the successful litigant’s substantial indemnity costs. Henderson J. himself noted that costs, when awarded on a higher scale, can serve to express the court’s disapproval of unreasonable conduct.²¹

38For these reasons, I find that Mr. Schikolenko is entitled to recover his costs on a full recovery scale.

3. Lawyers’ Rates

39Mr. Teitel was called to the Ontario Bar in 2014, and charges $300.00 per hour. He delegated some of the work on the file to his law clerk, Angela Perry, of 15 years’ experience, who charges $150.00 per hour.

40The “Information for the Profession” bulletin, from the Costs Sub-Committee of the Rules Committee (“the Costs Bulletin”)²², suggests maximum hourly rates (on a partial indemnity scale) of $225.00 for lawyers, such as Mr. Teitel, with less than 10 years’ experience, and $80.00 for law clerks. While it is arguable that these rates are normally reserved for matters of the greatest complexity, I am satisfied they are reasonable here.

41The Costs Bulletin, published in 2005, is now dated. It is therefore appropriate to make an adjustment to the rates suggested in the Costs Bulletin based on inflation. Smith J. took this approach in First Capital (Canholdings) Corp. v. North American Property Group.²³

42Mr. Teitel’s partial indemnity rates of $225.00 in 2005 is the equivalent of $272.96 today, according to the Bank of Canada’s online Inflation Calculator, which I round to $270.00. A law clerk’s rate of $80.00 in 2005 is the equivalent of $97.05 today, which I round to $100.00.

43Aitken J., in Geographic Resources, allowed the Defendants/Respondents’ costs of an appeal from a Master’s order on a partial indemnity scale in the amount their lawyer had charged.²⁴ She rejected the Plaintiffs/Appellants’ argument that the Respondents should be awarded less than they had been charged because the parties had agreed that costs would be paid on a partial indemnity scale. Aitken J. began by considering the Costs Bulletin. She considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group, but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she used their unadjusted rates.²⁵

44Aitken J. makes it clear that the starting point in arriving at an appropriate hourly rate when fixing costs is the Costs Bulletin, not the actual hourly rate the lawyer charged her client. The actual rate charged is irrelevant, except as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged, in keeping with the principle of indemnification.²⁶ The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same place.

45Although Geographic Resources was a civil action, the approach that Aitken J. took in that case applies equally in the family law context. The court adjusts the hourly rate, based on the Costs Bulletin, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 24. If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly.

46As long as the resulting amount does not exceed the amount actually charged to the client, the actual fee that the client agreed to pay is irrelevant. On this basis, Mr. Teitel’s hourly rate, on a partial indemnity scale, should be reduced from $300.00 to $270.00, and his law clerk’s rate should be reduced from $150.00 to $100.00.

47Rule 1 of the Rules of Civil Procedure defines substantial indemnity costs to mean "costs awarded in an amount that is 1.5 times what would otherwise be allowable in accordance with Part I of Tariff A" - i.e. 1.5 times the partial indemnity rate.²⁷ Costs calculated on a substantial indemnity scale, obviously, represent something less than full indemnity. In the present case, Mr. Teitel’s hourly rate, on a substantial indemnity scale, would amount to $405.00 ($270.00 x 1.5), and Ms. Perry’s hourly rate would be $150.00, with the result that Mr. Teitel’s actual hourly rates, at $300.00, is less than the maximum he is entitled to claim on a substantial indemnity scale, and Ms. Perry’s hourly rate, at $150.00, is equal to her substantial indemnity rate. On that basis, I am satisfied that the hourly rates claimed by Mr. Schikolenko for Mr. Teitel and Ms. Perry are reasonable for the time they reasonably spent on the motions.

4. The lawyer’s rates: 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

48A reasonable amount of time was spent preparing for the motions. Mr. Teitel spent a total of 27.6 hours on the motions; Ms. Perry spent 10.8 hours. He was required to attend and prepare for an Early Case Conference, and to prepare two additional Affidavits, as a result of Ms. McLellan’s adjournment of his motions. He was additionally required to respond to Ms. McLellan’s cross-motion which she did not bring until after the Early Case Conference, and which was later dismissed, with the exception of the appointment of the Office of the Children’s Lawyer.

49Mr. Teitel spent 11.5 hours preparing the material for the contempt motion, being 4.4 hours in correspondence, telephone calls, and meetings, and 7.1 hours drafting and reviewing the documents and attending in court on October 18, 2017. He spent 6.9 hours for the Early Case Conference on November 23rd, being 3 hours in correspondence telephone calls and meetings, and 3.9 hours for drafting and revising the Brief, research, preparation and attendance. He spent 9.2 hours for the hearing on December 23rd, being 4 hours in correspondence, telephone calls, and meetings, and 5.2 hours in drafting and revising documents for the motion, preparation, and attendance. Ms. Perry spent 4.8 hours on the initial motion, 2.9 hours for the Case Conference, and 3.1 hours for the motions hearing on December 23rd.

50Ms. McLellan has not challenged the time Mr. Schikolenko’s lawyers spent on the motions. She also has not disclosed the time Mr. McGuire spent on the motion. In Risorto v. State Farm Mutual Automobile Insurance Co., Winkler J., then a motion judge, stated:

The attack on the quantum of costs, insofar as the allegations of excess are concerned, in the present circumstances is no more than an attack in the air. I note that State Farm has not put the dockets of its counsel before the court in support of its submission. Although such information is not required under Rule 57 in its present form, and the rule enumerates certain factors which would have to be considered in exercising the discretion with respect to the fixing of costs in any event, it might still provide some useful context for the process if the court had before it the bills of all counsel when allegations of excess and “unwarranted over-lawyering” are made. In that regard, the court is also entitled to consider “any other matter relevant to the question of costs”. (See Rule 57.01(1)(i). In my view, the relative expenditures, at least in terms of time, by adversaries on opposite sides of a motion, while not conclusive as to the appropriate award of costs, is still, nonetheless, a relevant consideration where there is an allegation of excess in respect of a particular matter.²⁸ (Emphasis added)

51In the absence of information from Mr. McGuire as to the time he spent, I find that the time Mr. Schikolenko claims for his lawyer is reasonable.

5. Expenses properly paid or payable

52The disbursements claimed by Mr. Schikolenko were conventional ones which are not challenged, $236.50 for photocopies, printing, and scanning, $75.75 for fax charges, $190 for courier, and $203.45 for process serving. The total was $705.70 plus $91.74 for H.S.T. I find the disbursements to be reasonable and recoverable in the amounts claimed.

6. Other Relevant Matters

(a) Proportionality

53I have considered the proportionality of the costs that Mr. Schikolenko has claimed. The principle of proportionality was added to the Rules of Civil Procedure by the amendment of Rule 1.04, which I apply by analogy to the present motion as there is no equivalent provision in the Family Law Rules. Rule 1.04 directs that the Rules be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” Sub-Rule 1.1, which was added, provides:

54Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. O. Reg. 438/08, s. 2.

55Mr. Teitel did not “over-lawyer” the motion. The time he spent was reasonably necessary to advance Mr. Schikolenko’s contempt motion and to respond to Ms. McLellan’s cross-motion. Mr. Schikolenko’s costs were $11,198.44 and that amount was not disproportionate to what was at stake in the motions.

56The costs imposed must serve as a deterrent to Ms. McLellan and other litigants tempted to remove their children unilaterally from the area where both parents are able to exercise access to them, especially in face of a Court Order requiring them to obtain the other parent’s consent or leave of the court to do so. Parents must understand that it is unacceptable to remove children from the area in breach of a Court Order, alienate children from the other parent, or make unfounded allegations of abuse, and that such conduct will attract costs on a full recovery basis. Mr. Schikolenko should be fully indemnified for the costs he incurred in combatting such conduct, and Ms. McLellan and other litigants must be made aware of the costs consequences that ensue.

(c) What is fair and reasonable

57I must, at this point, step back and examine the overall award with a view to determining whether it is ‘fair and reasonable’ for the kind of matter involved. In making this determination, I take into account the reasonable expectation of the parties concerning the amount of costs.²⁹

58I have considered the decision of the Court of Appeal in Hobbs v. Hobbs, (2008), in which the Court of Appeal upheld a finding of contempt and an order requiring the contemnor to pay costs paid on a full indemnity scale in the amount of $26,572.17, inclusive of HST and disbursements. That decision should have informed Ms. McLellan’s expectation of the costs she would face if unsuccessful in the motion.³⁰

CONCLUSION AND ORDER

59Based on the foregoing, it is ordered that:

Ms. McLellan shall pay Mr. Schikolenko’s costs of the motions, fixed in the amount of $11,198.44, consisting of the following:

Fees: $9,900.00

H.S.T. on Fees: 1,287.00

Disbursements: 705.70

H.S.T. on Disbursements: 91.74

TOTAL: $11,198.44

60These costs shall be payable forthwith, with 2% post-judgment interest from today.

Price J.

Released: December 13, 2017

CITATION: Schikolenko v. McLellan, 2017 ONSC 7481

COURT FILE NO.: FS-16-0201-00

DATE: 2017-12-13

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

ANDRE SCHIKOLENKO