COURT FILE NO.: FS-13-78828-00 DATE: 2018-11-19
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
KATHERINE ANN MULLIN Applicant
- and -
JOHN SHERLOCK Respondent
Counsel: Robert Halpern and Jessica Brown, for the Applicant Heather Hansen and Jenna Beaton, for the Respondent
HEARD: July 5, 2017, at Brampton, Ontario
BEFORE: Price J.
COSTS ENDORSEMENT
[1] Katherine Mullin tried since October 2013 to obtain full financial disclosure from John Sherlock, from whom she had separated in June 2013 after a 13 year relationship. She required the information to establish her entitlement to spousal support and equalization of net family property.
[2] After three Orders of this Court requiring Mr. Sherlock to provide disclosure, questioning by Ms. Mullen’s lawyer to obtain the information, and a further Order requiring Mr. Sherlock to answer questions he had been asked by the lawyer, failing which his pleadings would be struck, Ms. Mullen moved to strike Mr. Sherlock’s pleadings on the ground that he still had not complied. Mr. Sherlock, represented by his fourth lawyer in the proceeding, submitted that he had complied with his disclosure obligations and that if his answers were not satisfactory, the Court should employ less drastic measures than striking his pleadings to obtain the required information.
[3] In reasons issued on November 10, 2017, this Court found that:
(a) Mr. Sherlock had breached the Order initially made on April 3, 2017, which required him to pay spousal support to Ms. Mullin, by delaying his payment of spousal support to Ms. Mullin, but that eventually complied.
(b) Following Trimble J.’s order dated August 5, 2014, which required Mr. Sherlock to leave the proceeds of sale of the parties’ boat in trust with Robbins Appleby LLP, Mr. Sherlock’s request, through Ann Fan, on September 30, 2016, for the deposit of the funds to Mr. Sherlock’s new company’s account, and his failure to restore the funds to his lawyer’s trust account immediately, rather than retaining them for more than six months until Mr. O’Connor arranged for them to be returned, supported an inference that he had intentionally breached Justice Trimble’s Order.
(c) Mr. Sherlock’s evasive responses to Ms. Mullin’s disclosure requests were a deliberate attempt to frustrate her efforts to obtain the disclosure she was entitled to, and not simply an innocently imperfect attempt to comply.
(d) Mr. Sherlock failed to comply with the undertakings he gave when he was questioned on January 26, 2017, repeatedly breached the Orders of this Court for disclosure, and wilfully did so in a deliberate attempt to frustrate Ms. Mullin’s efforts to establish her claims.
[4] Ms. Mullin was forced to incur substantial legal costs in making repeated motions for disclosure that Mr. Sherlock should have provided in response to the requests that Ms. Mullin made since early in the proceeding. In the last of its Orders, the Court had warned Mr. Sherlock that if he failed to answer all questions asked at his examination of January 26, 2017, by April 26, 2017, his pleadings would be struck. He did not comply, and the Court therefore struck his pleadings.
[5] The parties were unable to resolve the issue of the costs of Ms. Mullin’s motion. The Court has reviewed the parties’ submissions and this endorsement will address that issue.
POSITIONS OF THE PARTIES
[6] Ms. Mullin claims her costs of the motion on a full recovery basis in the amount of $35,206.98. She relies on her presumptive entitlement to costs based on her success in the motion, and on Mr. Sherlock’s unreasonable conduct in repeatedly breaching court orders for disclosure.
[7] Mr. Sherlock argues that his unreasonable conduct was sufficiently sanctioned by striking his pleadings and by the court’s prior costs awards of $55,365.73. He submits that his conduct, “in the lead-up to the July 5, 2017 motion,” was reasonable and minimized the legal costs of both parties by narrowing the issues in dispute. He submits that he made a serious proposal to settle the entire motion, which was unreciprocated. He argues that there should be no costs ordered for the motion.
Legislative framework
(a) General Principles
The objectives of a costs order
[8] Indemnification of the successful party to a proceeding is the paramount objective to be served by a costs order. Other objectives include encouraging settlement, discouraging unreasonable conduct and unnecessary litigation,[^1] and preserving access to justice.[^2] The ultimate objective in balancing these objectives is to ensure that the justice system works fairly and efficiently.[^3]
The discretion to be exercised
[9] The determination as to which party, if any, should compensate the other for his/her costs, and as to the amount of such costs, is “within the court’s discretion.”[^4] The court must exercise its discretion with due regard to the objectives of costs awards, and to Rule 24(11) of the Family Law Rules, which sets out the factors relevant to how the objectives are best attained in a particular case.
The outcome of the motion
[10] Consideration of the relative success of the parties on the issues in the motion is the starting point in determining costs.[^5] Ms. Mullin was successful in her motion, having obtained an order striking Mr. Sherlock’s pleadings and permitting her to proceed to trial on an uncontested basis.
Factors to be considered
[11] Rule 24(11) of the Family Law Rules lists the factors the court should consider when 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.[^6]
Importance, complexity, and difficulty
[12] The motion was of importance to the parties. As I noted in my earlier reasons in this proceeding, the longer Ms. Mullin was delayed in obtaining disclosure, the greater the risk that Mr. Sherlock would prevail in a war of attrition against her, and frustrate her completely in her effort to establish her claims.
[13] The motion was of moderate complexity, owing to the challenge of determining whether Mr. Sherlock’s breaches of the prior orders, and of his outstanding undertakings, were willful, or whether he had made an honest effort to comply. As before, the factual complexity was increased by the fact that Mr. Sherlock had provided four separate and conflicting Financial Statements, and by the fact that four separate disclosure Orders were alleged to have been breached.
Reasonableness of each party’s behaviour – scale of costs
[14] Rule 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]
[15] Ms. Mullin seeks payment of her costs by Mr. Sherlock on a full recovery basis on the ground that he acted in bad faith by failing to comply with the disclosure orders. In Nairn v. Lukowski, in 2002, and in Piskor v. Piskor, in 2004, Blishen J. adopted the definitions of bad faith that the court formulated in Erickson v. Erickson,[^7] in 2000, and Hunt v. Hunt, in 2001.[^8] In those cases, it was held that bad faith could consist of an intentional breach of a court order in order to achieve an ulterior motive.
[16] The Family Law Rules do not explicitly provide for costs on either a partial or substantial indemnity scale. Rule 24(8) 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.[^9] It has a range of costs awards open to it, from nominal to just short of full recovery.
[17] In 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.[^10] 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.[^11]
[18] In Berta v. Berta, (2015), the Court of Appeal stated:
In Biant v. Sagoo (2001), 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), 67 O.R. (3d) 181 (C.A.), at para. 40.[^12]
[19] Costs 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. In appropriate circumstances, unreasonable behavior will 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.[^13] In doing so, he stated that costs orders are not designed mainly to be a punishment, but acknowledged that costs, when awarded on a higher scale, can serve to express the court’s disapproval of unreasonable conduct.[^14]
a) Applying the principles to the facts of the present case
[20] Mr. Sherlock sought to frustrate the court’s process by providing deliberately ambiguous and misleading answers to the questions he was asked and by failing to produce documents that he was ordered to produce as long ago as November 25, 2013. His conduct justifies an order requiring him to pay Ms. Mullin’s costs on a full recovery basis.
[21] As a rule, the successful party in a motion made necessary by the responding party’s contempt is entitled to his costs on at least a substantial indemnity scale.[^15] This is because a finding of contempt is a finding of unreasonable conduct. A finding of contempt, which is substantially what Mr. Sherlock’s conduct amounted to, gives rise to a rebuttable presumption that the successful party is entitled to costs on a higher scale. In Astley v. Verdun, in 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.[^16]
[Emphasis added]
[22] In assessing whether Mr. Sherlock is contrite and has taken steps to minimize the costs that Ms. Mullin incurred, I have considered his failure to comply with my Order dated April 3, 2017. Between May 15, 2017, when Ms. Mullin’s motion was served, and July 5, 2017, when the motion was heard, Mr. Sherlock did not take any steps whatsoever to comply with the undertakings he had given.
[23] After Ms. Mullin served her Notice of Motion on May 15, 2017, for hearing on June 15, 2017, Mr. Sherlock requested an adjournment less than one week before the motion was to be heard. He indicated that he required an adjournment as he was retaining his fourth lawyer in the proceeding. Ms. Mullin acquiesced to his request and agreed to adjourn the motion to July 5, 2017.
[24] On June 29, 2017, Mr. Sherlock sent a letter to Ms. Mullin’s lawyer proposing that the motion be settled on terms, among others, of a requirement that she not bring another motion to strike his pleadings unless “there were further issues with disclosure” and that any further motion would be determined on a de novo basis. It was reasonable for Mr. Mullin not to accept Mr. Sherlock’s proposal in the circumstances. Mr. Sherlock had been given repeated opportunities to comply with court orders for almost four years and it was reasonable that Ms. Mullin would have regarded with suspicion a proposal that the slate be “wiped clean” and requiring her to proceed on a de novo basis if he continued to disregard his obligations.
[25] At this point, to relieve Mr. Sherlock of his presumptive obligation to pay Ms. Mullin’s costs on a full recovery basis would deprive Ms. Mullin of the full indemnification she is entitled to from the repeated contempt that ultimately led to the Court striking his pleadings.
Lawyer’s rates
[26] Ms. Mullin’s lawyer, Mr. Halpern, was called to the Bar in Ontario in 1985. He had practiced law for 32 years when he argued these motions. Mr. Halpern was assisted by Jessica Brown, who was called to the Bar in 2015, and a Law Clerk, Armando Dominguez.
[27] In my previous costs endorsement dated November 10, 2017, in paragraphs 78 to 86, I set out the approach to be taken to determining the hourly rates of the lawyers in this case. I will not repeat my analysis here, except to say that the rates to be allowed on a full recovery basis must not exceed the actual rates charged. In Mantella v. Mantella, (2006), Corbett J. noted that an award of costs is designed to indemnify, and that the amount should therefore not exceed the amount charged to the client.[^17] The Divisional Court, in Geographic Resources Integrated Data Solutions Ltd. v. Peterson, adopted Corbett J.’s analysis in Mantella, holding that it was not trumped by earlier jurisprudence from the Court of Appeal.[^18]
[28] On this basis, Mr. Halpern’s full recovery hourly rate is $635.00, which is only marginally greater than his maximum substantial indemnity scale rate of $630.00 ($420.00 x 1.5). Ms. Brown’s full recovery (actual) rate is $300.00, which is 20% higher than her substantial indemnity scale rate of $405.00. Courts have estimated substantial indemnity costs to be approximately 90% of costs on a full recovery basis. (See: 680195 Ontario Ltd. v. 2169728 Ontario Limited o/a Stoneybrook Auto Service, 2010 ONSC 4064, para. 8, citing Hanis v. The University of Western Ontario et. al., [2006] O.J. No. 2763 (S.C.J.), Power J., at para. 46). I am therefore reducing the amount allowed for Ms. Brown to $267.00, a reduction of 12%.
[29] Ms. Mullin claims a full recovery rate of $275.00 for Mr. Harlpern’s Law Clerk. The Costs Bulletin recommended a maximum rate of $80.00 for Law Clerks, which was the equivalent of $96.53 in 2017, when the motion was argued. On a substantial indemnity scale, that amounted to $144.80. I am therefore reducing Mr. Dominguez’ rate to $160.00, as 90% of that amount is $144.00. This represents a 42% reduction in Mr. Dominguez’ rate claimed, and I will therefore reduce the amount claimed for him by that percentage.
Time properly spent on the case
[30] Rule 24(11)(d) of the FLR directs me to consider “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 the order.”
[31] Mr. Halpern spent 18.4 hours, after delegating 34.2 hours to Ms. Brown and 26.1 hours to Mr. Dominguez. Based on the arguments made at the hearing, and the material submitted, I find the time spent by Ms. Mullin’s lawyers to have been reasonable, and proportionate to the amounts at stake in the proceeding.
[32] Mr. Sherlock does not argue that the time spent by Ms. Mullin’s lawyers was excessive. He also has not tendered his own lawyers’ Bill of Costs. As noted in my reasons dated November 10, 2017, when one party attacks another’s costs as excessive, but does not put its own dockets before the court, the attack “is no more than an attack in the air.” In Risorto v. State Farm Mutual Automobile Insurance Co., (2003), 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.[^19] [Emphasis added.]
[33] Based on the reductions in the hourly rates of Ms. Brown and Mr. Dominguez, the fees allowed to each lawyer will be as follows:
• Mr. Halpern: 18.4 hours @ $635.00 = $11,684.00 • Ms. Brown: 34.2 hours @ $267.00 = $9,131.40 • Mr. Dominguez: 26.1 hours @ $160.00 = $ 4,176.00
TOTAL: $24,991.40
Disbursements
[34] Ms. Mullin claims $2,035.12 for disbursements, including $485.17 for transcripts and $351.25 for process servers, the remainder being, for the most part, document reproduction and binding. Mr. Sherlock does not take issue with the disbursements and I find them to be reasonable.
Other Relevant Matters
[35] I must “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 determining what is fair and reasonable, I must take into account the reasonable expectation of the parties concerning the amount of costs.[^20]
[36] In my reasons dated November 10, 2017, I noted that at the outset of the hearing, Mr. Halpern estimated Ms. Mullin’s costs at $37,500.00, inclusive of HST and disbursements, and that Mr. Sherlock’s counsel estimated his client’s costs at $25,000.00. Based on those estimates, it cannot be said that the costs claimed by Ms. Mullin, following the hearing of that motion were not within the range of what Mr. Sherlock would have expected to pay if unsuccessful.
CONCLUSION AND ORDER
[37] For the foregoing reasons, it is ordered that:
- Mr. Sherlock shall forthwith pay to Ms. Mullin her costs of her motion, on a full recovery basis, fixed in the amount of $30,539.97, consisting of the following:
• Fees: $24,991.40 • HST: $ 3,248.88 • Disbursements: $ 2,035.12 • HST on disbursements: $ 264.57
TOTAL: $30,539.97
Price J.
Released: November 19, 2018
COURT FILE NO.: FS-13-78828-00 DATE: 2018-11-19
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
KATHERINE ANN MULLIN Applicant
- and –
JOHN SHERLOCK Respondent
COSTS ENDORSEMENT
Price J.
Released: November 19, 2018
[^1]: Fellowes, McNeil v. Kansa General International Insurance Co., 37 O.R. (3d) 464 (ON S.C.), para. 10 [^2]: 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 82 O.R. (3d) 757 (ON C.A.), per Feldman J.A., at para. 45 [^3]: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371, at paras. 25, 26 [Okanagan]. [^4]: Courts of Justice Act, s. 131. [^5]: Butty v. Butty, [2009] O.J. No. 1887 (SCJ) at para. 4, citing Sims-Howarth v. Bilcliffe, [2000] O.J. No. 330 (SCJ) [^6]: Family Law Rules, O. Reg. 114/99 [as amended] [^7]: Erickson v. Erickson (May 16, 2000), Doc. 00-FL-868 (Ont. S.C.J.) [^8]: Hunt v. Hunt, 2001 ONSC 39078 [^9]: Sordi v. Sordi, 2011 ONCA 665, 283 O.A.C. 287. [^10]: Sims-Howarth v Bilcliffe, [2000] O.J. No. 330 (S.C.J.) [^11]: C.A.M. v D.M., [2003] O.J. No. 3707 (C.A.), at para. 42. [^12]: Berta v. Berta, 2015 ONCA 918, at paras. 92-93. [^13]: Perri v. Thind et al. (2010), 98 O.R. (3d) 74 (S.C.). [^14]: Perri, at paras. 24-26, 32-33. [^15]: Cassidy v. Cassidy, 2011 ONSC 791, para. 14; Astley v. Verdun [2013] ONSC 6734 (SCJ) at paras 52 to 58 [^16]: Astley v. Verdun, para. 57 [^17]: Mantella v. Mantella, (2006), 27 R.F.L. (6th) 76 (S.C.J.) [^18]: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041 [^19]: Risorto v. State Farm Mutual Automobile Insurance Co. (2003), ONSC 43566, 64 O.R. (3d) 135, at para. 10 (S.C.), per Winkler J., cited in Springer v. Aird & Berlins LLP (2009), 2009 ONSC 26608, 74 C.C.E.L.(3d) 243 (Ont. S.C.), at paras. 10-17. [^20]: See: Boucher; Moon; Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 75 O.R. (3d) 638 (C.A.).