Court File and Parties

COURT FILE NO.: 579-06 DATE: 2018 07 05 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Joan Ann Mary Fox, Applicant and: James Henry Fox, Respondent

BEFORE: Justice N. Mossip

COUNSEL: John G. Cox, and Natalie Bazar, Counsel for the Applicant Douglas R. Beamish, Counsel for the Respondent

HEARD: June 28, 2018

Costs Decision

[1] The trial of this action, including closing submissions, was heard over 9 days. There was a further attendance on October 13, 2017, to deal with where the children resided after separation. The parties settled part of that issue and filed an Agreed Statement on what they could settle. I had to determine the remaining issues, as to the children’s residence post-separation.

[2] The final written judgment was released on October 31, 2017. The parties had to re-calculate the support arrears lump sum owing to Ms. Fox, based on the inputs I found to be applicable and which were set out in my Judgment.

[3] The parties used those inputs to calculate a lump sum owing for retroactive support in the sum of 1.8 million dollars. The parties once again retained experts to calculate “a fair and reasonable” deduction for tax consequences of the lump sum payment. The parties attended before me on March 28, 2018, to make submissions on a further 4 issues arising from my Judgment. I released written reasons with respect to those issues on April 4, 2018. With those reasons, the parties were able to complete all issues on this matter except for costs.

[4] Counsel requested that they be allowed to file written submissions with respect to costs, which they did. The written submissions as to entitlement and quantum, included a Bill of Costs and a brief of the relevant case law.

[5] I had some follow-up questions with respect to the costs’ issues. The parties attended before me on June 28, 2018, to answer my questions and to make further oral submissions.

[6] The applicant wife claims costs (fees and disbursements) on a full recovery basis, in the amount of $528,595.52. The “substantial indemnity” (80%) amount would reduce that to approximately $428,595.

[7] The respondent husband claims costs against the wife in the amount of $478,220.36.

[8] Rule 24(1) of the Family Law Rules provides that a successful party is presumptively entitled to their costs. In determining costs, the court must consider the factors set out in Rule 24(11). Rule 24(8) deals with how a finding of bad faith by a litigant affects the quantum of costs ordered. Lastly, the financial circumstances of the parties may be taken into account in setting the amount of the costs’ order.

[9] The following issues must be addressed and decided by me in order to determine who should pay costs in this matter, and in what amount. Those issues are:

1. Who was the successful party and why?
2. If Ms. Fox is entitled to costs, is she entitled to full recovery because the respondent acted in bad faith throughout the proceeding?
3. What effect do the offers to settle made by the parties have on costs? The parties acknowledge that Rule 18(14) does not apply to any of the offers made in this matter.
4. What is the appropriate quantum of costs to be paid?

Success

[10] The Judgment dated October 31, 2017, sets out what the issues were at the trial. There can be no doubt that on all of those issues, I found in Ms. Fox’s favour. In fact, on all the issues I had to decide, related to spousal and child support arrears and on-going spousal support, the position of Dr. Fox were rejected.

[11] Specifically, I found in Ms. Fox’s favour as follows:

• Ms. Fox should receive spousal support based on Dr. Fox’s actual income, which was higher than the income upon which she was paid support from 2006 to present.
• The child support was also adjusted, in Ms. Fox’s favour, based on Dr. Fox’s actual income. I also found that support on a shared basis should be paid when the children were at post-secondary school.
• No income was imputed to Ms. Fox for the purposes of calculating child or spousal support.
• Ms. Fox was entitled to spousal support based on a compensatory and non-compensatory basis.
• Ms. Fox was entitled to support based on the post-separation increases in Dr. Fox’s income from 2006.
• Ms. Fox was awarded retroactive support to July, 2006 based on the above findings.
• Ms. Fox was successful on her motive to have Dr. Fox found in contempt.
• Ms. Fox was successful on the finding that Dr. Fox intentionally destroyed certain business records which would not have assisted him at trial.

[12] Dr. Fox resisted all of the above claims, and was unsuccessful in his position.

[13] Counsel for Dr. Fox valiantly tried to claim costs based on the last 2 offers to settle made by Dr. Fox on February 28, 2017, and May 26, 2017 (5 days before the commencement of trial). Dr. Fox’s counsel submitted that these offers were reasonable and should have been accepted by Ms. Fox. In particular, counsel further suggested that Ms. Fox would have been “miles ahead” in terms of cash in her hand, if she had accepted Dr. Fox’s last offer.

[14] I disagree with that submission. I will discuss the offers below and set out why it was not reasonable in terms of value to her, for Ms. Fox to accept any of Dr. Fox’s offers.

[15] Further, to basically carve out one offer to settle, made on the eve of trial in a file such as this, with the litigation history it had, is completely unrealistic and, in itself, unreasonable.

[16] The parties separated on November 13, 2003. The application was commenced in July, 2006 by Ms. Fox. The trial was head in May, June and July of 2017. I made several findings with regard to the reasons for the delay, which focused exclusively on the conduct of Dr. Fox. It is simply unrealistic, with the tortured history of this file, to look at a single offer as a measure of success. In fact, the offer was not that reasonable and was not more favourable to Ms. Fox than the Judgment terms.

[17] Ms. Fox was the successful party in this litigation and is presumptively entitled to her costs.

Bad Faith

[18] I made the following findings against Dr. Fox:

• He was the primary, if not sole, cause of the extraordinary delay in this file reaching a conclusion;
• He was found in contempt of a specific court order not to sell property before trial and was fined $10,000 for that contempt;
• He was found to have not complied with an order to produce his section 7 expense receipts, as ordered by the court several times. As a result, he was not allowed to present these receipts and have them considered to possibly reduce the retroactive child support ordered;
• He was found to have deliberately destroyed certain business records for his dental practice. I found those records were likely to be of assistance in helping Ms. Fox to prove her entitlement to spousal support;
• I drew an adverse inference against Dr. Fox that the documented evidence would not have been helpful to Dr. Fox. This adverse inference was one further piece of evidence to assist Ms. Fox in her compensatory support claim; and
• Dr. Fox gave slow, late and no disclosure of financial matters. This conduct was the substantial reason why the file took so long to come to trial, and why the legal fees for both parties were extraordinarily high.

[19] It is true that I stated at paragraph 13 in my Judgment that “Dr. Fox’s conduct was not as egregious as applicant’s counsel would have me find…” This does not mean that his conduct was not egregious.

[20] Dr. Fox’s conduct was particularly egregious given the huge discrepancy between the parties’ net worth prior to and at the commencement of trial. Ms. Fox had a net worth of approximately $232,290.87, and Dr. Fox’s net worth was $2,089,760.77. A less resourceful litigant, with perhaps less generous relatives, would not have been able to fund this enormously expensive litigation, and would have given up. I find Dr. Fox’s behaviour was to a great extent directed to that goal.

[21] The test with respect to when a party’s conduct amounts to “bad faith” is set out in several cases. It may be summarized from Scalia v. Scalia, 2015 ONCA 492 (Ont. C.A.) as para 68:

[68] The application judge was obliged to identify and apply the legal test governing bad faith in this context. This he did not do. The legal test for bad faith in the family law context, as set out in S. (C.) v. S. (M.) (2007), 38 R.F.L. (6th) 315 (S.C.J.), at para. 17, aff’d 2010 ONCA 196, 2 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.

[22] I reject the submission of Dr. Fox’s counsel that this is penalizing Dr. Fox twice for the same conduct, since I ordered remedies against Dr. Fox in my Judgment already for the above conduct.

[23] The conduct is relevant to the issue of whether it meets the threshold of “bad faith,” regardless of whether in another context the conduct has been afforded a remedy in Ms. Fox’s favour. There was no case presented to me to support this suggestion of the respondent’s counsel.

[24] It is hard to imagine, based on my findings against Dr. Fox, a stronger case for a finding of “bad faith.” I find that Dr. Fox’s behaviour was carried out with the intent required to find bad faith, and as enunciated in Scalia.

Offers to Settle

[25] Dr. Fox’s counsel argues that the 2 offers that were prepared and served by Ms. Fox were unreasonably high, and the last one was made approximately 1 year before trial and she should be penalized for this.

[26] I disagree with this submission. As must be clear from these Reasons and my Judgment, the financial non-disclosure by Dr. Fox was pervasive, extensive, and lasted from the date of separation to the trial. It was virtually impossible for Ms. Fox to make any offers to settle because she did not have enough financial information from Dr. Fox.

[27] With regard to Dr. Fox’s offers made in February and May of 2017, these were not reasonable offers, not just because of their content, but because they did not include any payment of costs to Ms. Fox. Given the length of time this litigation had gone on, and the conduct of Dr. Fox throughout, it was unreasonable to not include a payment for costs to Ms. Fox in any offer to settle.

[28] Further, Ms. Fox was awarded monthly support in an amount greater than offered by Dr. Fox per month. There were also no conditions placed on the payment of spousal support, as there were in the offer.

[29] Lastly, after the 1.8 million dollar lump sum of arrears of support was determined, it took months, 2 experts, a further decision of the court and further work of counsel, to arrive at the net amount payable by Dr. Fox to Ms. of $666,000. It would have been impossible, and unrealistic, to expect Ms. Fox’s counsel to ascertain that the “cash in hand” for Ms. Fox would be similar in the end, to the number in an offer served 5 days before trial.

[30] Based on the above findings, Ms. Fox is awarded costs on a full recovery basis.

Quantum

[31] Counsel for the applicant conceded that Rule 24(8) is subject to a “reasonable” examination by the court of the Bill of Costs submitted.

[32] There were three issues for me to determine as follows:

• Possible duplication of senior counsel’s billable time claimed by junior counsel.
• Travel time, expensed by senior counsel at his full billable rate.
• Ms. Fox’s previous counsel’s claimed costs.

[33] Dr. Fox’s counsel did not take issue with Ms. Fox’s expert’s costs, as his expert’s costs were similar or more. He did not dispute the claimed disbursements. He also did not take issue with the overall number of hours recorded by senior counsel for Ms. Fox. The number of hours recorded for senior counsel for Dr. Fox were greater.

[34] I have no difficulty finding that junior counsel for Ms. Fox was necessary on this file, and ultimately saved Ms. Fox, and therefore Dr. Fox, legal fees. I accept the significant role she played on the file, and the costs’ savings that resulted. There however was some duplication of work for time spent on certain aspects. There is nothing wrong with that, I simply think that Dr. Fox should not have to pay for all of that. I have reduced junior counsel’s billable hours by 1/3 of her fees billed. I have allowed the relatively minor amount claimed for the work done by the other student/junior associate, in the file.

[35] I accept that the travel time was for important discussion time between senior and junior counsel, who did not bill for this time. Regardless, I do not think Dr. Fox should pay for all of this time at senior counsel’s full hourly rate. I have reduced the travel time by half of the fees billed.

[36] Ms. Fox paid Mr. Buck, her previous counsel, fees of approximately $92,000. In the Bill of Costs, there was an amount included for the drafting of pleadings for this action. I find this amount to be too high. I have allowed an amount of $10,000 for the interviews, preparing, drafting, and finalizing of the original court documents.

[37] I have reduced the Bill of Costs to allow an amount for Dr. Fox’s success on the 4 outstanding issues that the parties argued before me on March 28, 2018.

[38] I acknowledge that Ms. Fox, according to counsel, did not include any time for this attendance, but there was no doubt time spent preparing for the obtaining of evidence for submissions on these issues on which Dr. Fox was principally successful. I have reduced Ms. Fox’s Bill of Costs in a small amount to account for this fact, as Dr. Fox could have received some costs for this result.

[39] The total reduction in fees and GST for the above is $65,899.62. In this total, the costs to Dr. Fox are quantified at $10,000.

[40] Counsel for both parties are to be commended for their extraordinary efforts to settle what facts and issues they could on this file. These efforts greatly assisted the court. They also ensured that, at least to some extent, the costs of the trial were somewhat reduced.

[41] There was no submission that Dr. Fox could not afford to pay any costs order I made. Based on all of the above, I find that Dr. Fox shall pay to Ms. Fox the sum of $452,745 (HST included), which also includes $5,000 for the costs, preparation and attendance on this issue, on a full recovery basis, subject to the adjustments set out above. This amount includes the claimed expert’s fees and claimed disbursements.

Justice N. Mossip Date: July 5, 2018