Court File and Parties
KINGSTON COURT FILE NO.: 395/16 DATE: 20180627
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Jessica Hewitt, Applicant AND: Peter Rogers, Respondent
BEFORE: Justice A.C. Trousdale
COUNSEL: Balsam Bashi, Counsel for the Applicant Jacques J. Ménard, Counsel for the Respondent
HEARD: In chambers
Costs Endorsement
[1] This matter was heard by me on November 2, 2017 as a focused hearing on affidavit evidence to determine the income of the Respondent father for calculation of ongoing and retroactive child support and Section 7 expenses, with further income tax material to be filed by each party by November 16, 2017. Reasons for judgment were issued on February 28, 2018. In those reasons for judgment I stated that if the parties were unable to settle the issue of costs between them, either party could serve and file written submissions as to costs by March 21, 2018 with the right of reply submissions to be served and filed within 10 days after being served with costs submissions.
[2] The Applicant filed written submissions as to costs on March 20, 2018. The Respondent filed written submissions on costs on April 3, 2018 which was within the 10 days for reply due to the Easter weekend falling within the period. The Applicant filed reply submissions on April 4, 2018.
[3] The Applicant claims costs from the Respondent in the amount of $15,000.00 inclusive of fees, disbursements and taxes. The total amount of costs incurred by the Applicant in relation to child support is $22,746.00. This excludes the June 21, 2017 motion appearance as the court ordered no costs for that step. The Applicant states that she incurred costs in the amount of $13,015.00 inclusive of fees, disbursements and taxes prior to her May 5, 2017 offer to settle, and costs in the amount of $9,731.00 after her May 5, 2017 offer to settle.
[4] The Applicant argues that she is entitled to costs as she claims that she was successful at the hearing, that she made Offers to Settle which were as good as or better than the order made after the hearing, and that the Respondent made no offers to resolve the matter prior to the hearing.
[5] The Respondent is not seeking his costs of the hearing. The Respondent’s counsel states that he did not really anticipate that the Applicant would seek costs given what he characterizes as the very mixed results. The Respondent’s position is that given the mixed results, and the novelty and importance of the issue before the court, there should be no costs payable by either party to the other save for the Respondent’s costs for serving and filing his response to the Applicant’s costs submissions.
[6] In the Applicant’s reply, she argues that the Respondent is mistaken in a number of the statements and arguments contained in his submissions as to costs. She also claims that since the Respondent chose not to file his bill of costs, and raised no issues with time spent by the Applicant’s counsel on the file, the Applicant should be entitled to her costs as claimed in her submissions as to costs.
Offers to Settle
Applicant’s Offers to Settle
[7] The Applicant states that she made offers to settle that were not accepted by the Respondent. I was provided with a copy of the Applicant’s offer to settle dated March 8, 2017 and a copy of the Applicant’s offer to settle made May 5, 2017. It seemed from the Applicant’s submissions that there were other offers to settle but as I was not provided with a copy of those offers to settle, I am unable to consider them in determining the issue of costs.
Offer to settle dated March 8, 2017
[8] This offer to settle was signed by the Applicant’s counsel but was not signed by the Applicant personally. The Applicant’s counsel signed it on her behalf.
[9] Rule 18(4) of the Family Law Rules requires that an offer shall be signed personally by the party making it and also by the party’s lawyer, if any. This is a mandatory requirement.
[10] Accordingly, as the Applicant did not comply with the strict requirements of Rule 18, the costs consequences of Rule 18 cannot apply. However, this does not prevent me from taking this offer to settle into account when looking at the reasonableness of each party’s behaviour pursuant to Rule 24.
[11] In the Applicant’s offer to settle dated March 8, 2017, she offered that the child support be settled on the basis of adding $15,000.00 to the Respondent’s total income for the prior year as reflected in his Notice of Assessment, with this imputation of income to be back-dated to June, 2015.
[12] In the alternative to the annual imputation of income to the Respondent as aforesaid, the Applicant offered to settle the matter on the basis of the Respondent paying to the Applicant a lump sum payment of $12,000.00 “as reimbursement of the legal costs she has been overburdened with while seeking consent to relocate X and Y (children’s names replaced by me with X and Y) and the cost of seeking child support and contributions to section 7 expenses.”
[13] Looking at the child support for 2017, pursuant to the Applicant’s offer to settle, the Respondent’s income for calculation of child support would be his 2016 Line 150 income of $79,684.44 plus $15,000.00 for a total of $94,684.44. (child support pursuant to tables in force at that time of $1,351.00 per month.) This turns out to be slightly less than the Respondent’s total income calculated by me for 2016 at paragraph 117 of my Judgment in this matter where I calculated the Respondent’s 2016 total income for calculation of child support purposes in 2017 to be $95,536.00. (child support pursuant to tables in force at that time of $1,362.00 per month.)
[14] I do not agree with the Respondent’s submission that the $15,000.00 would have been grossed up for the calculation of child support purposes as the offer did not state that. However, as pointed out by the Applicant, if the Respondent were concerned with that aspect of the offer to settle, he could have reasonably sought clarification on that point.
[15] I note, however, that the imputation of income of $15,000.00 per year was to be back-dated to June, 2015 (2014 Line 150 income would be increased by $15,000.00) which would have called for a higher imputation of income in the earlier years than the Respondent actually received.
[16] The alternative offer of a lump sum of $12,000.00 which seems to be more directed to costs is more difficult to quantify and evaluate.
[17] I would agree with the Applicant’s reply submissions that the request for the lump sum of $12,000.00 was in the alternative to imputing income of $15,000.00 per year to the Respondent for the purpose of calculating child support, rather than in addition to the request to impute income as alleged by the Respondent in his submissions regarding costs.
[18] On the other hand I would agree with the Respondent’s submission that at the time that this offer was made, the Applicant was aware that on consent of the parties, Justice Minnema’s order made September 2, 2016 permitting the relocation of the children, provided that there should be no costs.
Offer to Settle dated May 5, 2017
[19] The offer to settle was signed by the Applicant’s counsel, but once again, this offer to settle was not signed by the Applicant personally which is mandatory as set out above. Accordingly, the costs consequences of Rule 18 cannot apply as the strict requirements of Rule 18 have not been complied with.
[20] As previously stated, the non-compliance with Rule 18 requirements does not prevent me from considering this offer when considering the reasonableness of the parties’ conduct in this litigation pursuant to Rule 24.
[21] In the May 5, 2017 offer, the Applicant sought that income of $15,123.00 be imputed to the Respondent every year rather than the $15,000.00 sought in the March 8, 2017 offer.
[22] Once again this was to be retroactive to June, 2015 calling for imputed income of $15,123.00 per year to the Respondent’s total income from 2014 onward.
[23] In the alternative to the imputation of $15,123.00 additional income to the Respondent, the Applicant offered to settle this matter by the Respondent paying to the Applicant a lump sum of $5,000.00 per year on the date the offer was accepted and thereafter for 7 consecutive years. The Applicant was to put these payments into RESP accounts for the two children equally, to prepare them for post-secondary education. Any funds not expended for post-secondary education would be released back to the Applicant.
[24] This alternative offer would result in $40,000.00 being paid by the Respondent over a period of 7 years with the payments being in RESP plans for the children. It appears to me that this would be a far greater amount to be paid by the Respondent than the additional child support he was required to pay on the imputed income pursuant to my order.
Respondent’s Offers to Settle
[25] The Respondent did not make any written offers to settle this matter.
Rule 24
[26] Rule 24 of the Family Law Rules deals with the issue of costs. Subrule 24(1) provides that there is a presumption that a successful party is entitled to costs.
[27] Subrule 24(11) provides guidance to the court as to what factors the court shall consider in determining the issue of costs. I will now review those factors which are relevant to this case.
The importance, complexity or difficulty of the issues
[28] This was an important issue and was reasonably complex. Counsel was aware of only one other reported case on the issue as to whether the sizeable lump sum disability payments received by the Respondent for injuries suffered by him through his military service pursuant to Section 45 of the New Veterans’ Charter should result in income being imputed to the Respondent for the purpose of calculating child support.
[29] This was the case of A.V.R. v. M.J.A., 2016 SKQB 272 which was a decision of Justice Barrington-Foote released in August 2016. In that case, Justice Barrington-Foote determined that the lump sum awards were for compensation and suffering or loss of amenities of life and should not be included in income.
[30] I came to the opposite conclusion in this case and determined that income should be imputed to the Respondent and grossed up for the purpose of calculating child support. Having come to that conclusion, it was also necessary to consider how much income should be imputed to the Respondent, and by what method it should be calculated.
[31] Neither party could be sure prior to the hearing as to what the final result would be.
The reasonableness or unreasonableness of each party’s behaviour in the case
[32] Each party claims that the other party was unreasonable during the course of the proceedings. The Applicant claims that the Respondent withheld disclosure regarding the lump sum awards received by him. The Respondent claims that the Applicant was unreasonable in seeking the immediate inclusion of the full amount of each award in income in the year in which each individual award was received. He subsequently claims that the Applicant was unreasonable in seeking to have the award divided over 10 years and having that amount included in income and grossed up for tax in each year.
[33] I do not find any bad faith on the part of either of the parties. I do find, however, that the Applicant was more reasonable in this litigation than the Respondent. In spite of the uncertainty of how the matter might be decided by the court, the Applicant made offers to settle this matter, some of which were reasonable attempts to settle this matter without incurring additional legal costs.
[34] The Respondent, however, made no offers to settle this matter. He took the position that there should be no income imputed to him and he did not move in any way from that position. He did not make a reasonable offer to settle this matter.
[35] The Applicant offered that income of $15,000.00 per year be added to the Line 150 income of the Respondent which by my calculations would result in a 2016 income of $94,684.44 and a child support order of $1,351.00 per month which is quite close to the child support of $1,362.00 per month ordered by me. The request for retroactivity was a problem however, as previously discussed by me in this endorsement, although the total amount might not be that significant.
[36] It could be argued that the offer by the Applicant to settle the matter for a lump sum of $12,000.00 to be applied towards her legal costs was a reasonable offer when looking at the number of years that the Respondent will have income imputed to him which will increase the child support payable by him. However, I note it was not clear whether the issue of imputation of income to the Respondent might have arisen again in the future as there was no final release offered.
[37] The Respondent’s behaviour was also unreasonable in stopping the child support payments for a period of time as “self-help” because he had over-paid child support up to that time, such that by the time of the hearing the Respondent owed child support arrears. The Respondent also delayed in contributing to just over $1,000.00 in Section 7 expenses for a period of about 10 months prior to June, 2017.
The lawyer’s rates
[38] The Applicant’s counsel provided a bill of costs. Her counsel’s year of call is 2014 and her hourly rate is $250.00 per hour which seems reasonable. The Respondent did not make any complaint about the rates of the Applicant’s counsel.
The time properly spent on the case
[39] From the Applicant’s bill of costs, it appears that she spent approximately 80 hours on this matter resulting in legal fees of $20,025.00 plus HST of $2,603.25.
[40] The Respondent’s counsel did not file a bill of costs, other than for a selected period from May 5, 2017 to May 31, 2017 (11.3 hours at a discounted rate of $250.00 per hour for a total of $2,825.00) with respect to work done by him on the Agreed Statement of Fact which the parties filed for the hearing. Accordingly, the total amount of legal fees incurred by the Respondent with respect to this matter is unknown which makes it difficult to compare the time spent by each party’s counsel on the case.
[41] In her Reply to the Applicant’s costs submissions, the Applicant states that the Respondent raised no issues with time properly spent. That is not completely correct, however, as the Respondent did submit that neither party should be entitled to claims costs for preparation of the Agreed Statement of Facts as it was mutually beneficial, and that the Applicant should not be entitled to claim costs for preparation of her Request to Admit which cost his client significant time to respond. I do not agree that the Applicant cannot claim costs for preparation of those documents.
[42] The Respondent was mistaken in his claim in his submission as to costs that the presiding justice at the case conference and presiding justice at the settlement conference in each instance chose not to award costs for those steps. The presiding justice at the case conference reserved the issue of costs of the case conference to the trial judge. It is correct that the endorsement at the settlement conference was silent on the issue of costs and I would agree that no costs should be considered for that conference.
Expenses properly paid or payable
[43] The Applicant’s claim for disbursements of $117.75 including HST are modest and reasonable, consisting of expenses for photocopies, faxes and courier.
Conclusion
[44] The Applicant was successful in having some income imputed to the Respondent for the purpose of calculating child support payable by the Respondent, which resulted in an increased child support payment to her for the two children. She was also successful in obtaining an order that the Respondent pay a set amount per month towards the children’s Section 7 expenses and in obtaining child support arrears.
[45] The Respondent was not successful in his position that no income should be imputed to him, but he did have some success in having the lump sum awards spread out over his anticipated lifetime.
[46] I find that the Applicant had more success overall than the Respondent at the hearing. I find that the Applicant made two offers to settle, which although they did not comply with the requirements of Rule 18, can still be considered by me. Those offers to settle were reasonable attempts by the Applicant to try to resolve this matter without the necessity for and the costs of a hearing.
[47] In the case of Scipione v. Scipione, 2015 ONSC 5982, Justice Pazaratz summarized important principles regarding costs as follows:
In Serra v. Serra 2009 ONCA 395 the Ontario Court of Appeal confirmed that costs rules are designed to foster three important principles: 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.
The assessment of costs is not a mechanical exercise. It’s not just a question of adding up lawyer’s dockets. Boucher et al v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (Ont. C.A.); Dingwall v. Wolfe 2010 ONSC 1044 (SCJ).
The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful litigant. Delellis v. Delellis, 2005 CarswellOnt 4956 (SCJ); Serra (supra)
The overriding principle is that costs are to be fixed in a way that is fair to the parties and reasonable in the circumstances. Murray v. Murray (2005), 79 O.R. (3d) 147 (Ont. C.A.); Guertin v Guertin 2015 ONSC 5498 (SCJ).
[48] I find that the Applicant is entitled to some costs from the Respondent, although she is not entitled to full recovery costs as claimed by her from the date of the Applicant’s offer to settle made May 5, 2017 for the reasons previously set out. I find that the Applicant is entitled to some costs on a partial indemnity basis.
[49] I have considered the written submissions on costs filed by each party and I have considered the provisions of Rule 18 and Rule 24 of the Family Law Rules as discussed above.
[50] I have also considered the lack of case law on the point at issue in this matter as there was only one prior reported case on this exact issue which was decided in favour of the position taken by the Respondent throughout this matter. I have also considered that the Respondent made no offer to settle this matter.
[51] As the Respondent has chosen not to file his complete bill of costs, it is impossible to compare his legal costs to those incurred by the Applicant. However, as the Respondent was represented by counsel throughout, he will have knowledge concerning the cost of legal fees and be aware that the Applicant would likely have incurred similar legal fees to what he has incurred. He would also be aware of the risks of cost consequences if he were not successful in his position at the hearing.
[52] Taking into account all of the aforesaid factors, and in the exercise of my discretion, I find that it is fair and reasonable in all of the circumstances of this particular case that there be an order that the Respondent pay costs to the Applicant fixed in the sum of $11,750.00 inclusive of fees, disbursements, and HST.
[53] As requested by the Applicant, the costs of $11,750.00 shall be attributed to child support and be enforceable by the Director of the Family Responsibility Office as child support.
[54] Order to go accordingly.
Justice A.C. Trousdale Released: June 27, 2018
KINGSTON COURT FILE NO.: 395/16 DATE: 20180627 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Jessica Hewitt Applicant - and - Peter Rogers Respondent BEFORE: Madam Justice A.C. Trousdale COUNSEL: Balsam Bashi, Counsel for the Applicant Jacques J. Ménard, Counsel for the Respondent COSTS ENDORSEMENT Madam Justice A.C. Trousdale Released: June 27, 2018