Overview

[1] This decision on costs follows a lengthy trial between the applicant, Jennifer Turk (“Jennifer”) and the respondent, Stuart Turk (“Stuart”). It must be read together with my Reasons for Judgment (“the Judgment”) (2017 ONSC 6889) and Reasons for Decision (2018 ONSC 1931) both of which are relied upon for the purpose of deciding costs.

[2] This is not a typical case where one party succeeded and the other did not. Jennifer and Stuart each advanced significant claims at trial that were dismissed.

[3] Jennifer’s request to declare the April 26, 2010 Separation Agreement (“Separation Agreement”) null and void and to set it aside was dismissed. She advanced two grounds for setting aside the Separation Agreement: non-disclosure and duress. She established that Stuart did not disclose his interest in 954 and TMG but I found that this non-disclosure was not significant. She failed to prove that the Separation Agreement was signed under duress.

[4] If Jennifer had succeeded in setting aside the Separation Agreement, she was seeking equalization of the net family property that included a payment to her in excess of $3,000,000, imputation of a higher income to Stuart ($700,000 to $1,500,000), a recalculation of what was owed to her for child and spousal support ($26,000/month) and retroactive support of $1,500,000.

[5] Stuart advanced his own claims. If Jennifer succeeded in setting aside the Separation Agreement, he claimed a further equalization payment from her. He requested further extensive relief if the Separation Agreement was set aside and if not he sought a variation of child and spousal support under the Separation Agreement. In particular he requested that his income for support purposes be reduced from $421,000 to $284,400, that income be imputed to Jennifer and that spousal support be terminated in 2021. He also sought to cap and lower his agreement to pay 100% of the s.7 expenses. The variation requests were retroactive to January 1, 2013 and included Stuart’s claim that Jennifer reimburse him for his alleged $333,624 overpayment of support.

[6] Stuart’s extensive claims to vary the Separation Agreement were dismissed. He failed to prove a material change in circumstances to support his variation requests. As I stated in para. 348 of the Judgment, “[i]n effect, Stuart is seeking to rewrite the Separation Agreement without complying with section 5.8 and the clear requirement that he must prove a material change in circumstances to support the requested variations”.

[7] I ordered the termination of child support. The facts that supported this termination were obvious and a trial was not necessary to reach this conclusion. Reasonable parties would have agreed to the termination of child support before the trial commenced.

[8] The termination of child support raised questions that the parties did not address in their final submissions. I reviewed this in my Reasons for Decision as follows:

[3] The Separation Agreement requires Stuart to pay Jennifer $10,000 net a month for child and spousal support. The Separation Agreement does not delineate how much of the $10,000 is child support versus spousal support.

[4] In the Judgment, I found that the termination of child support and Stuart’s continuing obligation to pay spousal support raises the following questions:

(i) How is the $10,000 amount for support in the Separation Agreement divided between child support and spousal support?

(ii) What amount did Stuart pay for child support for Jordan after the termination date of April 30, 2013?

(iii) What amount did Stuart pay for child support for Sydney after the termination date of September 1, 2016?

(iv) Should Jennifer be required to reimburse Stuart for the amounts in (ii) and (iii) above?

(v) After each termination date for the child support what does Stuart owe Jennifer for spousal support going forward?

[5] The written submissions filed at the end of the trial did not address the above questions that arose from termination of child support. As a result, the parties were provided with an opportunity to file further written submissions and have done so. This was supplemented with oral submissions to address questions that the written submissions raised.

[6] The termination of child support requires me to make further decisions based on the evidence that was presented at the trial. First, I must identify the quantum of spousal support that Stuart owes Jennifer following the termination of child support and going forward. Pursuant to a court order, Stuart has continued to pay Jennifer $10,000 net under the Separation Agreement. Second, the court must decide if Stuart has overpaid or underpaid spousal support after each termination date, the amount of the overpayment or underpayment and whether there should be a retroactive adjustment.

[9] Stuart argued that the $10,000 support payment in the Separation Agreement was divided between child and spousal support as follows: $5,136 was allocated to child support and $4,864 net (or $6,077 gross) was allocated to spousal support. He argued that effective September 1, 2016, this was the spousal support that he should pay. He did not prove this allocation at trial. As well, Stuart’s request that Jennifer reimburse him for his alleged overpayment was refused.

[10] Jennifer argued that the spousal support did not have to be capped at $11,000 gross a month (the cap in the Separation Agreement). She also argued that her spousal support should be set at no less than $11,000 gross. This is the amount that I ordered.

[11] Effective January 1, 2018, I ordered Stuart to pay Jennifer monthly spousal support of $11,000 pursuant to s. 15.2 of the Divorce Act, with a cost of living adjustment and a Support Deduction order. Stuart’s request for an order that Jennifer reimburse him for any overpayment of spousal support was denied.

position of the parties

[12] Jennifer seeks costs of the proceeding effective June 1, 2016. The costs of all previous steps have been dealt with in cost orders.

[13] Jennifer recognizes that she did not succeed in setting the Separation Agreement aside. However, she states that she successfully resisted Stuart’s claims and obtained an order for spousal support greater than what Stuart requested at trial. However, the spousal support I awarded Jennifer was less than what Stuart offered prior to trial.

[14] Jennifer states that she should be awarded costs within a range between full recovery, ($975,027.94 inclusive of disbursements and HST), substantial indemnity being at least 80% ($780,022.35 inclusive of disbursements and HST) and partial indemnity of at least 66% ($640,518.43 inclusive of disbursements and HST).

[15] Jennifer argues that while success at trial was “mixed” she is entitled to costs because of “Stuart’s egregiously bad faith behaviour”.

[16] Stuart argues that he is “presumptively entitled to his costs of this litigation” on a full recovery basis. However, he only seeks an order that Jennifer reimburse him for the $140,000 that he paid her for interim disbursements pursuant to the order of Kiteley J. dated June 24, 2016. This order was made under rule 24(12) of the Family Law Rules O. Reg. 114/99.

[17] Stuart states that he is presumptively entitled to costs for the following reasons:

• He succeeded on the main issue; Jennifer’s claim to set aside the Separation Agreement was dismissed. Stuart states that this issue consumed 90% of all litigation fees.

• The support issues consumed less trial time and neither party achieved the outcome pursued.

• Stuart served many offers to settle that matched the relief on the set aside issue and included a support offer that was more favourable than what was ordered.

[18] Finally, Stuart denies that he acted in bad faith and he argues that Jennifer’s costs are excessive when compared to the fees he paid.

Legal Framework

[19] Rule 24 of Family Law Rules deals with costs. The following parts of this rule are relevant:

(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;

(b) the reasonableness of any offer the party made; and

(c) any offer the party withdrew or failed to accept

(6) If success in a step in a case is divided, the court may apportion costs as appropriate.

(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.

(11) In setting the amount of costs, the court 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.

[20] As the court stated in Serra v. Serra, 2009 ONCA 395 at para. 8 "[m]odern costs rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330, at para. 22”.

analysis

Rule 24(11) Factors

Importance, complexity, fees, and time spent

[21] The issues in this trial were of great importance to the parties, and as I stated at para. 12 of the judgment “[t]he litigation between the parties was lengthy and bitter".

[22] The financial issues were complex. As I stated at para. 13 of the Judgment, "[m]any days of trial time were consumed by complicated issues concerning the valuation of Stuart's interest in the Turk family companies”.

[23] Stuart argues that Jennifer’s legal fees are excessive. He paid his counsel a flat fee that was $225,500 less then what Jennifer paid. Stuart does not suggest that the time spent by Jennifer’s team was excessive. They both had a similar team of lawyers representing them and shared the work with junior counsel. While it obviously benefitted Stuart to have a flat fee agreement, I see no reason to be critical of the fees or time spent by either side. This was a long and complicated trial.

Bad faith/ Unreasonable behaviour

[24] Jennifer argues that “Stuart’s egregiously bad faith behaviour” entitles her to the costs that she seeks.

[25] The legal test for bad faith in the family law context is set out in Scalia v. Scalia 2015 ONCA 492 at para. 68:

The legal test for bad faith in the family law context, as set out in S. (C.) v. S. (M.) (2007), 2007 CanLII 20279 (ON SC), 38 R.F.L. (6th) 315 (S.C.J.), at para. 17, aff'd 2010 ONCA 196, 262 O.A.C. 225, is that the impugned 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." In short, the essential components are intention to inflict harm or deceive.

[26] Stuart’s conduct is specifically described in the Judgment. There are several examples of Stuart’s failure to comply with his disclosure obligations that are described in the following excerpts of the Judgment. These are the excerpts that Jennifer relies on:

[62] To document the transfer of Stuart’s SEJ share to Harry, a Deed of Gift was signed on February 1, 1994. Stuart did not reveal the existence of the 1994 Deed of Gift until April 2016, when it appeared as a document on the scope of review section of Mr. Martindale’s expert report (Mr. Martindale is the expert Stuart retained). Stuart had never previously produced the 1994 Deed of Gift. During his cross-examination, he revealed that he found the original 1994 Deed of Gift in a desk drawer. He brought the original to court and produced it during his cross-examination. This is an example of Stuart’s disregard for his disclosure obligations.

[184] During cross-examination, counsel confronted Stuart with information they had found on the internet after Stuart revealed the Two Hands application during his testimony. While Stuart said that the application is in it “infancy”, his evidence on cross-examination shows that this is not credible. There is a US public company called Two Hands that issued a public statement on December 12, 2016, announcing its co-parenting application that was under development and expected to launch in the first quarter of 2017. When confronted with this public statement, Stuart agreed that his application is being tested. He is fully aware of the American company and the public statement. Stuart’s company, Cellular Connection, owns the licencing rights to the application and hopes to licence the application to the American company. Clearly, Stuart was not telling the truth when he said the application was in its “infancy”.

[186] This cross-examination was pursued by Jennifer’s counsel because Jennifer was seeking to set the Separation Agreement aside and secure a higher support payment from Stuart. While Jennifer’s request to set the Separation Agreement aside is denied, this evidence is still important because it is another example of Stuart’s failure to comply with his disclosure obligations.

[200] As I will explain below, the evidence of Stuart and Mr. Rosenberg is not credible. I find that Stuart failed to disclose his interest in 954 and TMG.

[207] Stuart testified that he did not become aware of his interest in 954 and TMG until 2014, when Mr. Rosenberg told him he had an interest in these companies. As explained below, this explanation is not credible.

[223] It is possible that Stuart consciously and deliberately concealed his interest in 954 and TMG when the Separation Agreement was being negotiated. When I consider the totality of his non-disclosure conduct, I prefer a different characterization of Stuart’s behaviour that is just as serious. Stuart does not care if he is complying with his disclosure obligation. He has made this clear through his repeated non-compliance with this important obligation. He is dismissive of the documentary disclosure process and the Family Law Rules. His chronic non-compliance reveals incomplete sworn financial statements and a failure to follow court orders.

[224] Simply put, Stuart remembers what is beneficial to his position in this litigation.

[298] While I have found that the non-disclosure was not “significant”, it is important to note that Stuart’s disregard for his disclosure obligations in this litigation continued despite court orders that were issued against him. On three occasions, the court identified his non-compliance (see Turk v. Turk, 2014 ONSC 4490; Turk v. Turk, 2015 ONSC 3165; Turk v. Turk, 2015 ONSC 5845). Stuart’s conduct created an atmosphere of distrust and unnecessarily contributed to the cost of this litigation.

[27] Stuart’s position on the valuation date was unreasonable as explained in paras. 79-86 of the Judgment. I found as follows:

[80] During this proceeding and through the trial, Stuart took the position that they separated on November 5, 2007. Jennifer always maintained that they separated on January 2, 2008. Stuart agreed in the mediation process to accept Jennifer’s date of separation. He then unreasonably decided to dispute the date of separation during this litigation, with no chance of succeeding on this point.

[84] Given these facts, Stuart’s decision to dispute the January 2, 2008 date of separation was wholly unreasonable. There was no justification for this decision. His evidence that he felt that the marriage was over in November 2007 is not a justification.

[85] Stuart’s decision to dispute the date of separation caused unnecessary expense in the litigation. It required the parties to testify about the date of separation and the valuation experts had to deal with two dates of separation.

[28] Finally, six days of court time were wasted hearing the evidence of Stuart’s accounting expert, Ron Martindale, most of which had no value. It was Stuart’s responsibility to have his interest in SEJ and 396 valued. As I explained, SEJ and 396 are companies that own or owned real estate. The preferred method of valuing an interest in real estate is to obtain a real estate appraisal. Stuart did not do this. Instead, he led the evidence of Mr. Martindale who did not have this expertise. The following excerpts from the Judgment discuss the problem:

[249] Mr. Martindale explained that when he is asked to value a share that a person owns in a company that is a “straight real estate” company such as SEJ, 396 and 954, the “preferred method and [Mr. Martindale’s] preferred method is to get a real estate appraisal”. He explained that real estate appraisers are the experts in valuation of real property and “they are the most qualified” to provide an opinion.

[250] There was no evidence that real estate appraisals of the properties could not be obtained. There was hearsay evidence from one real estate appraiser who gave a quote to do the work and then refused the retainer because it was a family dispute. There was hearsay evidence that a second real estate appraiser was prepared to accept the retainer. Apparently, it was decided that Mr. Martindale could produce a more reliable opinion than a real estate appraiser. No evidence was offered to back this up.

[257] I have serious concerns about Mr. Martindale’s valuation of Stuart’s interests in SEJ and 396 and the decision to embark on this process without a certified real estate appraiser. However, it is not necessary for me to review this in more detail as I have not set the Separation Agreement aside and do not have to equalize the NFP. As a result, I do not have to value Stuart’s interest in the Turk companies (SEJ and 396) that owned or own numerous pieces of real estate. If I had set the Separation Agreement aside, I would have attached no weight to the valuations relating to SEJ and 396.

[258] Simply put, when the expert states that the “preferred method” of valuing a share interest in a “straight real estate” company such as SEJ, 396 and 954, is to get a real estate appraisal because “they are the most qualified” to provide an opinion, a real estate appraiser must be retained. It is not an option to proceed without the best and most reliable expert evidence.

[259] Stuart was responsible for having his interests in the Turk companies properly valued. He did not comply with this important obligation. Instead, he instructed his expert to prepare reports that relied on methodologies that were not reliable. There was no evidence to explain why this unusual and unnecessary approach was required. As a result, almost six days of trial time were spent on Stuart’s expert’s evidence most of which had zero value.

[29] In summary, there was good reason to criticize Stuart for his unacceptable and unreasonable conduct. However, such conduct does not rise to the level of bad faith as defined in Scalia.

[30] The reasonableness of Jennifer’s conduct is also a relevant factor. She failed to accept Stuart’s offers to settle that are reviewed below.

The Offers to Settle

[31] Family Law Rules 18 (14), (15) and (16) deal with the issue of costs when an offer to settle has been made. This rule states:

(14) A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:

If the offer relates to a motion, it is made at least one day before the motion date.

If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.

The offer does not expire and is not withdrawn before the hearing starts.

The offer is not accepted.

The party who made the offer obtains an order that is as favourable as or more favourable than the offer.

(15) The burden of proving that the order is as favourable as or more favourable than the offer to settle is on the party who claims the benefit of subrule (14).

(16) When the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms, even if subrule (14) does not apply.

[32] If Stuart was seeking costs, Stuart’s offers would presumptively entitle him to costs under rule 18(14).

[33] When a party fails to accept an offer to settle, this is a factor to consider when deciding if that party acted reasonably (rule 24 (5)).

Stuart’s Offers to Settle

[34] Stuart made offers in April 2016, September 2016, January 2017 and a mid-trial offer in March 2017. The outcome he obtained at trial was more successful than the rule 18 offers to settle that he made in September 2016 and January 2017 and the offer that he made mid-trial in March 2017 (that was not a rule 18 offer).

[35] The April 2016 offer provided that the Separation Agreement was valid and in force. Stuart offered to pay Jennifer $5,000 gross in spousal support. The offer terminated all guideline child support and required Jennifer to pay for 35% of all s. 7 expenses. This offer was overtaken by more generous offers that followed.

[36] The September and January offers included two separate offers (A or B). Jennifer could choose A or B, but the parts in A and B were non-severable. Both were open until one minute after the start of the trial. The January offer replaced the September offer. As noted below, the January offer increased the monthly spousal support.

[37] Part A gave Jennifer the option of settling the set aside claim and proceeding to trial on the support issues and part B gave her the option of settling all issues.

[38] Part A of the September and January offers provided that sections 5.1 to 5.10 of the Separation Agreement (dealing with child and spousal support) would be deleted and the balance of the Separation Agreement would remain in force. The issue of prospective child and spousal support would proceed to trial. This would include determination of Stuart’s income and Jennifer’s income for support purposes, quantum of support, sharing of s. 7 expenses and liability for child support based on the child’s residential schedule. Stuart offered to continue paying the $10,000 net support pending a decision at trial. Lastly, it was a term of these offers that the parties each bear their own costs (except the costs of the issues that would go to trial).

[39] Part B of the September 2016 and January 2017 offers provided as follows:

(i) The Separation Agreement was valid and in force until January 1 2017 (September offer) and until January 31 2017 (January offer)

(ii) In the September offer, effective January 1 the parties would agree to vary sections 5.1 to 5.10 of the Separation Agreement. Stuart’s income would be fixed at $500,000 for support purposes and $30,000 of income would be imputed to Jennifer. Stuart would pay Jennifer spousal support of $11,000 a month taxable in her hands (this is what I ordered Stuart to pay).

(iii) In the January offer, Stuart agreed effective January 31, 2017, to increase his income to $650,000 and pay Jennifer $16,000 a month in spousal support, taxable in her hands (this exceeds the $11,000 ordered at trial).

(iv) In both offers no child support was payable for Jordan.

(v) In the September offer, Stuart agreed to pay $1284 in child support for Sydney, regardless of where Sydney lived when she came home from University. Under this offer, child support for Sydney would end after completion of her first undergraduate degree. The Judgment terminated child support for Sydney on September 1, 2016.

(vi) In the January offer, no further child support was payable for Sydney.

(vii) In the September and January offers, Jennifer would pay $500 a month in satisfaction of her total contribution to s. 7 expenses (in the Separation Agreement he agreed to pay 100% of all s.7 expenses with no contribution from Jennifer).

(viii) Both offers provided that a change in Sydney’s “education plan” would be a material change in circumstances that would allow either party to seek an adjustment of guideline child support and/or s.7 expenses.

(ix) Both offers provided that Stuart would receive no retroactive credit for any overpayment of support

(x) Both offers provided that Jennifer would not repay the rule 24(12) payment that Kiteley J. ordered.

(xi) In the September offer, the parties would bear their own costs if the offer was accepted on or before December 8, 2016. If accepted after that date, Stuart agreed to pay Jennifer $20,000 in costs. In the January offer, the parties would bear their own costs if the offer was accepted by January 30, 2017. If accepted after this date, Stuart offered to pay Jennifer $1,000 for costs.

[40] The mid-trial offer made on March 2, 2017, offered Jennifer an uncharacterized payment of $400,000 over a two to three period. The offer provided that there would be no adjustments or credits for any monies already paid, $16,000/month in spousal support, effective April 1, 2017, no s. 7 contribution from Jennifer and no payment for costs.

[41] Jennifer served several offers to settle but none trigger the cost consequences of Family Law Rule 18. For example, her October 6, 2016 offer required Stuart to pay $17,000 a month for spousal support, retroactive child support totalling $651,012 and an equalization payment of $2,500,000. In her January 24, 2017 offer, Jennifer agreed to terminate child support and but wanted an increase of the monthly spousal support to $23,000. The offer also required Stuart to pay a lump sum payment of $1,700,000 in satisfaction of all retroactive support claims and equalization of property. A final offer followed on January 30, 2017. In this offer, monthly spousal support increased to $19,500 and the lump sum payment dropped to $1,300,000.

No Costs are Awarded

[42] As I stated at the outset, this was not a typical case because neither party was successful. When the various factors are considered, I conclude that no costs should be ordered. In my view this result is consistent with the primary objective of the Family Law Rules to “deal with cases justly”.

[43] Jennifer has not proven bad faith to justify her request for costs. While Stuart’s conduct was on many levels unacceptable and unreasonable, this does not led me to award Jennifer costs, when all of her claims were dismissed and the $11,000 spousal support order is less than the $16,000 that Stuart offered in January 2017.

[44] Stuart’s request for an order that Jennifer return the $140,000 to him is denied. This rule 24(12) payment was not ordered as a loan as in Romanelli v Romanelli 2017 ONSC 1312 at para. 64. Furthermore, even if Stuart could establish a basis in law to seek recovery of this money, his unacceptable and unreasonable conduct does not justify such an order.

conclusion

[45] I make the following orders:

(i) No costs are awarded to either party.

(ii) Stuart’s request for an order that Jennifer return $140,000 to him is denied.

___________________________ C. Horkins J.

Released: June 20, 2018

COURT FILE NO.: FS-14-19285

DATE: 20180620

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Jennifer sandra turk

Applicant

– and –

Stuart Bernard Turk

Respondent

REASONS FOR JUDGMENT

C. Horkins J.

Released: June 20, 2018

Turk v. Turk, 2018 ONSC 3822

Case Summary

Overview

position of the parties

Legal Framework

analysis

Rule 24(11) Factors

Importance, complexity, fees, and time spent

Bad faith/ Unreasonable behaviour

The Offers to Settle

Stuart’s Offers to Settle

No Costs are Awarded

conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Issues

Statutory Provisions 3

Legal Tests 1

Legislation 2