SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FC-14-311
DATE: 2018/03/12
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sean Akkawi
Applicant
– and –
Nada Habli
Respondent
J. Alison Campbell, for the Applicant
Odette Rwigamba, for the Respondent
HEARD: In writing (at Ottawa)
The text of the original Costs Endorsement and Endorsement Regarding Trust Funds was corrected on March 12, 2018 and the description of the correction is appended
AMENDED COSTS ENDORSEMENT AND ENDORSEMENT REGARDING TRUST FUNDS
SHELSTON J.
COSTS ENDORSEMENT
[1] The applicant seeks costs against the respondent in the amount of $55,284 including HST and disbursements incurred from September 25, 2015, when the parties settled the parenting issues, until the conclusion of the trial. In the alternative, the applicant seeks costs in the amount of $35,000 including HST and disbursements representing approximately one half of the legal fees incurred by the applicant from the date of an Offer to Settle dated November 22, 2016 until the conclusion of the trial.
[2] The respondent seeks costs on a substantial indemnity basis fixed in the amount of $106,039.19 including HST and disbursements and, in the alternative, an award of costs on a partial indemnity basis fixed in the amount of $72,685.60 including HST and disbursements. In addition, the respondent seeks the sum of $11,639 for fees of retaining Connolly and Koshy related to reviewing and commenting on the applicant’s financial disclosure and the expert report of Mr. Pittman.
The Family Law Rules
[3] Under Rule 24(1) of the Family Law Rules, O. Reg. 114/99, there is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.
[4] Rule 24(5) states that in deciding whether a party has behaved reasonably or unreasonably, the Court shall examine:
(a) whether the party made an offer to settle;
(b) the reasonableness of any offer the party made; and
(c) any offer the party withdrew or failed to accept.
[5] 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 (Rule 24(8) of the Family Law Rules).
[6] The factors to be considered in assessing costs are set out in Rule 24(11) of the Family Law Rules, which include:
(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 witness, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of order;
(e) expenses properly paid or payable; and
(f) any other relevant matter.
ANALYSIS
Successful party
[7] The successful party is presumptively entitled to costs; however, a successful party who has behaved unreasonably during the 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 (Rule 24(4) Family Law Rules).
[8] The applicant submits that while success was divided, he was more successful than the respondent and is entitled to a portion of his costs including the cost of the expert witness, Mr. Pittman. The respondent submits that she was successful in opposing the applicant’s position in trial regarding the value of his business, imputing an income higher than the $42,000 claimed by the applicant, avoiding an imputation of income to the respondent during her retraining, obtaining retroactive and prospective spousal support and her right to receive the sums due under the Mahr.
[9] Offers to settle are the yardstick with which to measure success and are significant both in considering liability and quantum as set out in Osmar v. Osmar (2000), 2000 20380 (ON SC), 8 R.F.L. (5th) 387 (Ont. S.C.).
[10] The applicant made a series of formal offers to settle pursuant to the Family Law Rules as follows:
(a) May 15, 2015:
i. on custody, the applicant offered that he would have sole custody of the four children of the marriage;
ii. proposed a parenting agreement where Maya would divide her time equally between the parties’ homes: Issam would reside in a shared arrangement with the parties while Adam and Jad would live with the applicant and would have access to the respondent;
iii. on child support, the respondent would pay the applicant the sum of $6081 for all support up to and including June 1, 2015 and, commencing July 1, 2015, she would pay table child support of $587 per month based on an imputed income of $42,000;
iv. the section 7 expenses would be shared on a 50-50 basis based on the respondent’s imputed income of $42,000 and the applicant’s annual income of $42,000;
v. the respondent would designate the applicant as the irrevocable beneficiary in trust of a life insurance policy in the amount of $200,000;
vi. there would be no payment of spousal support and both parties released any future claim; and
vii. the applicant would pay to the respondent an equalization payment of $110,327.
(b) November 12, 2015:
i. on child support, the applicant proposed that the respondent would pay child support to the applicant in the amount of $6820 up to November 30, 2015 and child support payable to the applicant based on an imputed income of $42,000 or a higher amount if her income is higher than $42,000;
ii. a set off of the child support whereby the respondent would pay $966 per month commencing October 1, 2015 and the applicant would pay $614 per month to the respondent, leaving the respondent paying the difference of $352 per month to the applicant;
iii. an obligation of each party to obtain and maintain a life insurance policy of $200,000 identifying the other party as the irrevocable beneficiary in trust for the children;
iv. offering to pay a lump sum spousal support in the amount of $9579.44 less the arrears of child support of $6820 leaving an amount payable by the applicant to the respondent in the amount of $1640 and thereafter neither party have an obligation to pay support to the other; and
v. the equalization issue was deferred.
(c) November 22, 2016:
i. up to and including December 31, 2014, the respondent would owe the applicant child support fixed in the amount of $4428;
ii. for the period of January 1, 2015 to September 30, 2015, child support would be calculated on the basis that the applicant’s income was $66,197 and the respondent’s income would be based on the income earned up to September 2015;
iii. from October 1, 2015 up to December 31, 2015, the applicant’s income would be fixed at $66,197 and the respondent’s income would be imputed at $40,000;
iv. from January 1, 2016 to December 31, 2016, the applicant’s income would be fixed at $66,197 and the respondent’s income would be imputed at $40,000;
v. commencing January 1, 2016, the applicant’s income would be fixed at $66,197 and the respondent’s income would be fixed at no less than $60,000 per year;
vi. regarding section 7 expenses, the parties’ share shall be calculated based on the applicant’s income of $66,197 and the respondent’s actual income, so long as same is above $60,000 per year;
vii. on life insurance, the applicant proposed that both parties designate the other as the irrevocable beneficiary in trust of a life insurance policy of $200,000;
viii. on spousal support, the applicant would pay the respondent a lump sum payment of $15,000 in exchange for a mutual release of spousal support; and
ix. on the equalization of the net family property, the applicant offered to pay to the respondent the sum of $155,000.
[11] On the issue of income determination of the parties, the applicant’s offers fixed his income at $66,137 while the respondent submitted that the income should be fixed at $85,000. I fixed the income of $90,000. Regarding the respondent’s income, the applicant’s offers fixed her income at either 40,000, $42,000 or $60,000. The respondent’s offers fixed her income at $54,100 commencing January 2017. I fixed her income at between $16,116, $24,007, $31,929 and $54,001.
[12] The applicant’s offers ranged from no payment of spousal support and a mutual release, a lump sum payment of $9,579.44 and finally, in the offer dated November 22, 2016, a lump sum payment of $15,000. The respondent’s offers included a retroactive payment of $35,500 for both spousal and child support and, commencing January 2017, the sum of $271 a month in spousal support. In the respondent’s offer dated May 21, 2017, she increased the lump sum payment for spousal and child support to $40,000 and that the spousal support would be $444 per month until December 31, 2018 at which time a review would take place. I ordered a lump sum payment of spousal and child support up to December 2017 in the combined amount of $40,961 and prospective spousal support of $668 per month.
[13] The applicant’s offers on child support were all based on imputing income to the respondent effective 2015 at $42,000 per month, as contained in the offers of May 15 and November 12, 2015. In the applicant’s offer dated November 22, 2016, the applicant sought to utilize the respondent’s income earned from January 1, 2015 to September 30, 2015 and to impute income in the years 2016 in the amount of $40,000 and, commencing in the year 2017, in the amount of $60,000. In the respondent’s offers to settle, she proposed that her income be fixed at $54,101 commencing in the year 2017. In my decision, I found that the respondent’s income in 2015 would be $24,007, in the year 2016, $31,929 and in the year 2017, the sum of $54,001.
[14] Regarding the equalization of the net family property, the applicant’s offers evolved with the first offer proposing an equalization payment of $110,327 in the offer dated May 15, 2015 to an equalization payment of $155,000 in the offer to settle dated November 22, 2016. In the respondent’s offer dated May 14, 2017, she proposed an equalization payment of $180,000 and in her final offer to settle dated May 21, 2017, she offered to settle for an equalization payment of $175,000. The final equalization payment was $110,666.79 plus the payment under the Mahr of $56,490.20 for a total of $167,164.99.
[15] Regarding the Mahr, I have taken into consideration that the Court of Appeal released its decision in Bakhshi v. Hosseinzadeh, 2017 ONCA 838, on November 3, 2017, after the completion of the trial and the receipt of the parties written submissions. After receiving supplemental submissions from the parties on the implication of that decision on the facts of this case, the respondent was a successful party.
[16] The respondent made two offers to settle, neither of which were signed by the respondent or her lawyer. On both offers, the names of the respondent and the name of her counsel are typed in the space reserved for signatures. Rule 18(4) of the Family Law Rules requires that a party sign any offer to settle. In this case, none of the respondent’s offers to settle are signed by the respondent or the lawyer.
[17] However, despite being formal offers to settle within the meaning of Rule 18 of the Family Law Rules, I can still consider the offers in my decision on costs. The respondent’s offers contain the following:
(a) May 14, 2017:
i. the applicant to pay the respondent the sum of $35,500 for spousal support and child support for the period of August 2, 2012 to December 31, 2016 on a tax-free basis to be paid no later than June 30, 2017;
ii. commencing January 1, 2017, the applicant’s income was set at $85,000 and the respondent’s income was set at $54,101;
iii. commencing January 1, 2017, the applicant would pay the respondent child support of $184 per month based on shared custody;
iv. commencing January 1, 2017 to December 31, 2019, the applicant would pay the respondent spousal support of $271 per month;
v. spousal support was to be reviewed to determine whether or not the respondent continues to need support from the applicant after December 31, 2019;
vi. parties agreed to share the section 7 expenses in proportion to their income;
vii. the applicant to pay the respondent the sum of $180,000 as her share of the equalization of the net family property;
viii. 50% of the total equalization payment owed by the applicant to the respondent to be paid by December 1, 2017 and the balance no later than December 1, 2018;
ix. the respondent to register a lien against the applicant’s property to secure the equalization, child and spousal support payments;
x. an order that the applicant obtain life insurance in the amount of $350,000 naming the respondent as the irrevocable beneficiary to secure the child and spousal support and in the event the applicant dies prior to paying the respondent the sum owed for retroactive child and spousal support, the respondent’s claim to be a first charge on the applicant’s estate;
xi. provisions regarding the return of the respondent’s parents’ belongings and her belongings, including the wedding ring; and
xii. arrears of child and spousal support to be paid no later than June 30, 2017.
(b) May 21, 2017 revoking and replacing the offer dated May 14, 2017:
i. the applicant to pay the respondent the sum of $40,500 for spousal support and child support for the period of August 2, 2012 to December 31, 2016 on a tax-free basis to be paid no later than May 31, 2017;
ii. commencing January 1, 2017, the applicant’s income was set at $85,000 and the respondent’s income was set at $54,101;
iii. commencing January 1, 2017, the applicant pay the respondent child support of $184 per month based on shared custody;
iv. commencing January 1, 2017 to December 31, 2018, the applicant would pay the respondent spousal support of $444 per month;
v. that all payments required for the purpose of child and spousal be binding on the applicant’s estate;
vi. spousal support to be reviewed to determine whether or not the respondent continues to need support from the applicant after December 31, 2018;
vii. parties agreed to share the section 7 expenses in proportion to their income;
viii. the applicant to pay the respondent an equalization payment of $175,000;
ix. the sum of $110,000 of the equalization payment to be paid no later than May 31, 2017 and the balance no later than December 1, 2018;
x. an order that the applicant obtain life insurance in the amount of $250,000 naming the respondent as the irrevocable beneficiary to secure child and spousal support; and
xi. provisions regarding the return of the respondent’s parents’ belongings and her belongings.
[18] I find that there was divided success based on the following:
a) the respondent was not successful on her claim for retroactive child support from August 2012 to January 2014;
b) the respondent was successful on the determination of her income for the years 2014, 2015 and 2016;
c) the applicant was successful on the determination of his income for the year 2014; however, the respondent was successful in imputing income of $90,000 commencing the year 2015. This is more than the $85,000 offered by the respondent;
d) the applicant was not successful in obtaining a contribution of $2,947.06 as a contribution by the respondent to the children section 7 expenses;
e) the applicant was successful in obtaining an order, with the respondent’s consent at trial, to an order that she would maintain the children as the beneficiaries of her extended medical and dental plan available through her employment;
f) the respondent was not successful in obtaining spousal support retroactive for the period of August 2012 to March 2014. She was successful in obtaining prospective spousal support effective March 2014 resulting in an award of $36,723 and spousal support for the period of March 1, 2014 to December 2017 and prospective spousal support of $668 per month commencing January 1, 2018. The applicant’s position that the respondent would be entitled to a lump sum payment of $12,757.87 for spousal support up to December 31, 2016 was not successful. Further, the respondent was successful in being entitled to spousal support from March 1, 2014 to February 1, 2024;
g) on the issue of life insurance, both parties consented to an order in the amount of $150,000 designating the other party as the beneficiary in trust as security for support;
h) on the issue of child support, the respondent was successful in obtaining an order for the payment of arrears of child support of $4,238 and ongoing child support of $247 per month;
i) on the issue of the equalization of the net family property, the applicant was successful on the value of his business at $122,500, the contingent tax liability for his business was $13,168, that the applicant was entitled to deduct the line of credit of $33,842.15. The respondent was not successful in seeking a recognition that she owed her parents $35,000 and in seeking an exclusion of the three properties owned in Lebanon;
j) on the issue of the Mahr, the respondent was partially successful in having the value of the Mahr included as an asset and a liability in the equalization calculation and an order that the applicant pay the respondent the balance owing under the Mahr of $56,498.62. The respondent was not successful in seeking to have the value of the Mahr included as an asset liability on the date of marriage; and
k) the applicant was the successful party on the final equalization payment of $110,666.92.
[19] Considering the various issues and the success of the parties considering their offers, the positions taken at trial and the trial decision, I find that the respondent was the more successful party that is presumptively entitled to some costs.
The importance, complexity or difficulty of the issues
[20] There is no doubt that this trial canvassed very important issues to the parties specifically with respect to income determination, entitlement to spousal support, quantification of child and spousal support, the equalization of the net family property and the respondent’s entitlement to the amounts due to her under the Mahr.
[21] The matters before the court were not difficult or complex.
The reasonableness or unreasonableness of each party’s behaviour
[22] In determining whether a party acted reasonably or unreasonably, I am to examine a party’s behaviour in relation to the issues from the time they arose, determine if an offer to settle was made, determine the reasonableness of any offer and consider if any offer that was withdrawn earlier was not accepted.
[23] Courts have repeatedly stated that costs may be used to send a clear message disapproving of parties’ behaviour where it may be found to be unreasonable (see R.B. v J.W., 2012 ONCJ 799, 2012 CarswellOnt 16857).
[24] The applicant submits that the respondent behaved unreasonably in three areas:
(a) the respondent argued against the conclusions reached by the income expert, Mr. Pittman, without providing expert evidence or any reliable evidence to support her assertions;
(b) the respondent sought to exclude three properties in Lebanon, to include debt owing to her parents and argued that the applicant had unreported income. The applicant argues that she acted unreasonably because she failed to call the appropriate witnesses to address these points thereby increasing costs unreasonably both prior to injuring the trial; and
(c) the respondent appeared to consciously frustrate the process by failing to inquire as to her OSAP repayment options, by failing to inquire about adding the children to her health benefits and by claiming that she had additional documents regarding the properties in Lebanon but never produced them.
[25] The respondent submits that the applicant’s behaviour was unreasonable reaching to the level of bad faith entitling her to costs on a full recovery basis. The particulars of the applicant’s unreasonable behaviour are as follows:
(a) the applicant’s insistence that his business had no value;
(b) the applicant’s refusal to pay child or spousal support to the respondent; and
(c) the applicant’s position that his income was no more than $42,000 in the face of evidence that the applicant had submitted a mortgage application in 2015 which claimed his annual income was $90,000.
[26] In Scipione v. Del Sordo, 2015 CarswellOnt 14971 (Ont. S.C.) Pazaratz J. reviewed the law of bad faith:
Bad faith is not synonymous with bad judgment or negligence; rather, it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction or obfuscation: Children’s Aid Society of the Region of Peel v. F. (I.J.), 2009 ONCJ 252, [2009] O.J. No. 2348 (OCJ); Biddle v. Biddle, 2005 7660 (ON SC), 2005 7660, [2005] O.J. No. 1056 (SCJ); Leonardo v. Meloche, 2003 74500 (ON SC),[2003] O.J. No. 1969 (SCJ); Hendry v. Martins, [2001] O.J. No. 1098 (SCJ).
There is a difference between bad faith and unreasonable behaviour. The essence of bad faith is when a person suggests their actions are aimed for one purpose when they are aimed for another purpose. It is done knowingly and intentionally. The court can determine that there shall be full indemnity for only the piece of the litigation where bad faith was demonstrated. Stewart v. McKeown, 2012 ONCJ 644, 2012 ONCJ 644 (OCJ); F.D.M. v. K.O.W. 2015 ONCJ 94 (OCJ).
To establish bad faith the court must find some element of malice or intent to harm. Harrison v. Harrison 2015 ONSC 2002.
Rule 24 (8) requires a fairly high threshold of egregious behaviour, and as such a finding of bad faith is rarely made. S.(C.) v. S.(C.) (supra); Piskor v. Piskor, 2004 5023 (ON SC), [2004] O.J. No. 796 (SCJ); Cozzi v. Smith 2015 ONSC 3626, 2015 ONSC 3626 (SCJ).
[27] I do not find that the applicant engaged in conduct that equates to bad faith. I do not find that there was any element of malice or intent to harm or conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction or obfuscation. I do not find that the applicant engaged in such conduct.
[28] On the issue of unreasonable conduct, I do not find that either party exhibited unreasonable behaviour.
The lawyer’s rates and disbursements
[29] The applicant’s bill of costs indicates that his lawyers spent a total of 333.80 hours while the respondent’s bill of costs indicates that her counsel spent 337 hours from September 25, 2015 to November 17, 2017.
[30] I agree and adopt Justice Pazaratz’s reasoning in Benzeroual v. Issa and Farag, 2017 ONSC 6225 where he stated that if a party seeks a large amount of costs, it is incumbent on that party to provide sufficient information:
(a) to particularize what work had to be performed and why;
(b) to address varying levels of indemnification which may apply to different issues; and
(c) to reassure the court that costs are not currently being claimed for previous steps or events where costs have already been dealt with (or should already have been dealt with). This requires more than a generic statement that unrecoverable costs are not being claimed.
[31] In this case, both parties provided a general breakdown of hours rendering it impossible for me to determine whether the hours were necessary without a breakdown of the time spent on each task (Blank v. Micallef, 2009 60668 (ONSC) and Benzeroual v. Issa and Farag, 2017 ONSC 6225).
[32] I find that the hourly rates sought by both parties to be reasonable.
[33] The respondent seeks as part of her costs the sum of $11,639 for her accounting expert who did not testify at the trial. While Mr. Pittman prepared a series of reports, testified and was cross examined, there was no expert report or expert testimony from Mr. Koshy.
[34] I find that the remaining amounts claimed for disbursements to be reasonable.
The time properly spent on the case
[35] My role in assessing costs is not necessarily to reimburse the litigant for every dollar spent on legal fees but the award of costs must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceedings (see Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
Disposition on Costs
[36] I have considered the fact that the respondent has been the successful party and that the successful party is not to be compensated for every dollar spent on legal fees. I have considered the factors set out in the Family Law Rules, the various offers to resolve this dispute, the positions taken by the parties at trial, the trial result and the costs incurred by these litigants.
[37] I find it is fair and reasonable that the applicant pay to the respondent costs fixed in the amount of $30,000 inclusive of HST and disbursements.
ENDORSEMENT REGARDING TRUST FUNDS
[38] On May 16, 2017, the parties agreed that the applicant would pay $160,000 into his counsel’s trust account pending further order of the court or the consent of the parties. The parties do not agree on the distribution of these funds.
[39] The applicant proposed in his initial costs submissions delivered January 15, 2018, that the funds be dispersed as follows:
(a) $10,260 payable to Mr. Pittman;
(b) $40,000 payable to Ms. Campbell;
(c) $20,000 payable to the applicant to effect necessary renovations to his business; and
(d) $89,746.31 to the applicant.
[40] The respondent proposed in her cost submissions dated February 2, 2018 that the sum of $160,000 be payable to her to satisfy the sums due by the applicant to her pursuant to the trial decision and that the balance of $48,126.41 be paid no later than December 31, 2018.
[41] On March 1, 2018, the applicant provided reply costs submissions. I did not grant the applicant the right to provide reply costs submissions received approximately 30 days after receiving the respondent’s costs submissions. In the reply costs submissions, the applicant alleges that $40,000 of the $160,000 was to be his counsel’s trial retainer and that consequently the sum of $40,000 should be used by the applicant to pay his trial counsel. I disagree.
[42] On May 16, 2017, counsel for the respondent, at the continuation of the trial, made an oral motion for a preservation order requesting that $172,000 in the applicant’s bank account be paid into court pending further order of the court based on admissions by the applicant, on May 15, 2017 during this trial evidence, that he had mortgaged the former matrimonial home and that he had $172,000 remaining in his bank account. The applicant indicated that he had about $10,000 of carrying costs that he needed to pay and, after conferring with his counsel, agreed to an order that $160,000 of the $172,000 be placed in Ms. Campbell’s trust account by May 18, 2017 and said sums were not to be released except by order of this Court or the consent of the parties. At no point did the applicant indicate that $40,000 of the $160,000 was to be for his counsel’s trial retainer. Counsel for the applicant indicated that the applicant’s intention was to have the funds available to satisfy any decision of the court including legal fees.
[43] In the circumstances, I order that the sum of $160,000 held by Ms. Campbell in trust be paid to the respondent forthwith to apply against the sums due by the applicant to the respondent pursuant to my trial decision.
[44] Further, the respondent has submitted that the balance of $48,126.41 owing pursuant to my decision shall be payable by the applicant no later than December 31, 2018. I agree and also order that the sum of $30,000 for costs is due and payable no later than December 31, 2018.
Mr. Justice Mark Shelston
Released: March 12, 2018
Appendix
March 12, 2018
[37] I find it fair and reasonable that the applicant pay to the respondent costs fixed in the
amount of $30,000 inclusive of HST and disbursement.
COURT FILE NO.: FC-14-311
DATE: 2018/03/12
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sean Akkawi Applicant
– and –
Nada Habli
Respondent
AMENDED COSTS ENDORSEMENT AND ENDORSEMENT REGARDING TRUST FUNDS
SHELSTON J.
Released: March 12, 2018