Court File and Parties
Newmarket Court File No.: FC-16-052197-00 Date: 2018-11-20 Ontario Superior Court of Justice – Family Court
Between: Tara Natalie Fine, Applicant – and – Michael Victor Joseph Albright, Respondent
Counsel: J. Moldaver, for the Applicant P. Slan, for the Respondent
Written Submissions Received: Last submissions received July 25, 2018
Decision - Costs
Fryer, J.
I. Introduction
[1] I heard a trial of this matter over six days between November 22, 2017 and November 30, 2017. My decision was released on May 29, 2018 and parties delivered written submissions.
[2] The parties settled the contentious parenting issues prior to trial on a without costs basis. This trial dealt with the outstanding financial issues including income determination, child and spousal support, equalization of net family property and several post-separation adjustments.
[3] The Applicant is seeking costs totalling $165,618.82 comprised of partial recovery costs up to November 9, 2017 and full recovery costs thereafter. The Applicant seeks to have costs payable from the Respondent’s share of the net proceeds of sale of the matrimonial home.
[4] The Respondent’s position is that there was divided success and each party should bear their own costs.
II. General Principles of Costs
[5] In Serra v. Serra, 2009 ONCA 395, 66 R.F.L. (6th) 40, at para. 8, the Court of Appeal confirmed that modern costs rules are designed to foster three fundamental purposes: (i) partial indemnification of the cost of litigation for successful litigants, (ii) encouragement of settlement between parties, and (iii) deterrence and sanctioning of inappropriate behaviour by litigants. Ultimately, costs should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party.
[6] In Berta v. Berta, 2015 ONCA 918, 128 O.R. (3d) 730, at para. 94, as revised on January 18, 2016, the court stated the following:
[A] successful party in a family law case is presumptively entitled to costs. An award of costs, however, is subject to the factors listed in r. 24(11), the directions set out under r. 24(4) (unreasonable conduct), r. 24(8) (bad faith) and r. 18(14) (offers to settle), and the reasonableness of the costs sought by the successful party.
[7] In the recent decision of Beaver v. Hill, 2018 ONCA 840, the Court of Appeal emphasized, at para. 10, that “[t]his caveat is an important one since, as this court pointed out in Frick v. Frick, 2016 ONCA 799, 132 O.R. (3d) 321, the Family Law Rules “embody a philosophy peculiar to a lawsuit that involves a family” (at para. 11).”
[8] In Mattina v. Mattina, 2018 ONCA 867, it was held that “Rule 2(2) adds a fourth fundamental purpose: to ensure that cases are dealt with justly: Family Law Rules, r. 2(2); E.H. v. O.K., 2018 ONCJ 578, at para. 8; Sambasivam v. Pulendrarajah, 2012 ONCJ 711, at para. 37.”: at para. 10.
[9] The assessment of costs is not just a mechanical exercise. Costs must be proportional to the amount in issue and the outcome: Beaver, at para. 12.
[10] 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: see Boucher et al. v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); Selznick v. Selznick, 2013 ONCA 35, [2013] W.D.F.L. 1013; Murray v. Murray (2005), 2005 46626 (ON CA), 79 O.R. (3d) 147 (C.A.); Delellis v. Delellis and Delellis, 2005 36447 (ON SC).
III. Analysis
[11] The starting point in an analysis of costs is an assessment of relative success: see r. 24(1) of the Family Law Rules, O. Reg. 114/99; Sims-Howarth v. Bilcliffe (2000), 2000 22584 (ON SC), 6 R.F.L. (5th) 430 (Ont. S.C.); Mattina, at para. 13.
[12] Rule 24(6) of the Family Law Rules requires the court to consider whether there was divided success. Divided success does not mean equal success. Rather, r. 24(6) requires a contextual analysis as not all issues are equally important, equally time-consuming or equally expensive to determine: Jackson v. Mayerle, 2016 ONSC 1556, 130 O.R. (3d) 683, at paras. 66 and 67.
[13] The Applicant submits that she was the successful party whereas the Respondent asserts that success was divided.
(a) Determination of Success including Offers to Settle
[14] The Applicant made an offer to settle dated November 9, 2017 that dealt only with financial issues. The offer was not severable.
[15] The Respondent made an offer to settle dated November 13, 2017. The financial parts of his offer were not severable.
(i) Income & Child Support
[16] The Respondent’s income was disputed. In her draft order, the Applicant sought to impute an income to the Respondent of $100,000. The Respondent’s position was that his income should be imputed at $35,000.
[17] I imputed an income to the Respondent of $50,000 which was the same income that each party had offered to impute to him.
[18] The Applicant sought child support retroactive to November 1, 2016, but in her offer to settle she agreed to waive any claim for Table child support prior to September 30, 2017. However, this term was not severable from other parts of the offer.
[19] In his draft order, the Respondent offered to pay child support commencing November 1, 2016. In his offer to settle, the Respondent offered to pay child support commencing December 1, 2017. He made no offer prior to trial with respect to retroactive child support.
[20] I ordered the Respondent to pay retroactive Table child support commencing December 1, 2016 and a retroactive contribution to special and extraordinary expenses totaling $17,074.
[21] Despite the limitations of her offer, the Applicant enjoyed relative success with respect to the determination of retroactive child support.
[22] The parties’ offers in terms of sharing special and extraordinary expenses, claims for tax benefits and credits, and annual reviews were substantially similar and not a factor with respect to costs.
[23] The Applicant’s offer provided that the Respondent carry a policy of life insurance with her as named beneficiary as security for child support in the amount of $250,000. The Respondent did not make an offer with respect to life insurance but did propose to carry $100,000 in his draft order. I ordered that the Respondent maintain a $100,000 policy for this purpose.
(i) Equalization & Unequal Division Claim
[24] The Applicant’s position at trial was that she was owed an equalization payment of $111,804.64 and that she was entitled to an additional payment of $162,513.97 “on account of accounting issues, in accordance with an agreement made between the parties and/or section 5(6) of the Family Law Act and/or otherwise”.
[25] In her offer to settle, the Applicant offered a global payment of $165,111, less the $10,000 advance, on account of equalization and lump sum spousal support. Her offer included a requirement that the Respondent enter into a release of spousal support and that his spousal support claim be dismissed with prejudice. She also waived her unequal division claim.
[26] The Respondent sought an order that the Applicant would pay him $237,581.48 as an equalization payment. In his offer, he proposed a reduced equalization payment of $200,000.
[27] I ordered that the Applicant make an equalization payment of $1,909.02 and I dismissed her claim for an unequal division.
[28] Relative to their trial positions, the parties were equally unsuccessful. The Applicant was seeking that $274,318.61 be paid to her by the Respondent and the Respondent was seeking a payment from the Applicant of $237,581.48.
[29] On one level, it would appear that the Applicant had some success as her offer was for $155,111, but this number was inextricably linked to spousal support, including a release of future obligations.
(ii) Spousal Support
[30] The Applicant’s position at trial was that no spousal support would be payable and that the Respondent’s claim would be dismissed.
[31] In her offer to settle, she purported to offer a lump sum but the quantum of the payment was undefined as it was intertwined with the equalization calculation. By deducting the equalization payment actually ordered, this would equate to lump sum spousal support of approximately $163,202 tied to a release of support.
[32] At trial, the Respondent sought periodic spousal support of $4,557 per month commencing November 1, 2016 with indefinite duration. This was the mid-range Spousal Support Advisory Guidelines (“SSAG”) amount based on an imputed income to him of $35,000 and the Applicant’s current income of $428,000.
[33] In his offer, the Respondent offered to accept periodic spousal support of $4,216 per month commencing April 1, 2016. The spousal support would be variable in the event of a material change in circumstances whether the change was “foreseeable, unforeseeable, foreseen or unforeseen”.
[34] I ordered that the Applicant pay the Respondent periodic spousal support in the amount of $3,284 for a total period of 42 months commencing June 1, 2018. This was based on an imputed income of $50,000 to the Respondent and the Applicant’s income as of the date of separation which was significantly lower than her income at trial. In addition, I ordered the Applicant to pay retroactive spousal support for the period from December 1, 2016 to June 1, 2018, totalling $31,393. I also held that the Applicant’s claim for reimbursement of $9,335.50 representing withdrawals that the Respondent made from the joint account after the date of separation could be construed as additional lump sum spousal support.
[35] The Applicant’s offer framed as a global settlement made it very difficult to assess relative success on the issues. I assume that this was intended so that a loss on one issue could be offset by a win on another. However, in terms of a possible resolution of the issues between the parties and this costs analysis, this approach muddied the waters.
[36] The quantum of spousal support under the SSAG is related to duration. The Applicant proposed a lump sum with a dismissal of the spousal support claim. The Respondent proposed non-time limited support subject to a wide material change clause.
[37] Neither party enjoyed success with respect to this issue relative to their offers to settle. While the Applicant’s offer appears better than the lump sum equivalent of my order, this assumes that spousal support will terminate forever at the end of the 42-month period. The Respondent did not have success relative to his offer in that the quantum of support ordered was less and payable for a fixed term albeit subject to variation among other things. The form of the Respondent’s offer with respect to spousal support was more reasonable.
[38] I ordered that the Applicant maintain a policy of life insurance in favour of the Respondent for $138,000 as security for her spousal support obligations.
(iii) Post-Separation Accounting & Occupation Rent
[39] The parties agreed that the matrimonial home should be sold.
[40] In her offer to settle, the Applicant offered to list the matrimonial home for sale and for her to have exclusive possession pending the sale. Pursuant to the Applicant’s offer, the Respondent was required to pay for 50% of the carrying costs of the home from October 1, 2017 until the date of the sale out of his share of the net sale proceeds. The Applicant waived all other post-separation adjustment claims including her claim for an unequal division of property related to the Respondent’s line of credit withdrawals.
[41] In his offer to settle, the Respondent offered to pay for 50% of the carrying costs of the home commencing April 1, 2016 to be paid out of his share of the net sale proceeds. However, the Respondent also required that the Applicant pay him $12,750 on account of post-separation adjustments to line of credit advances taken by each of them.
[42] The Applicant estimated that the Respondent’s share of the carrying costs on the home from her date of separation up to the date of trial were $18,465.
[43] I did not order the Respondent to pay 50% of the carrying costs of the home. He was the successful party with respect to this issue.
(iv) Exclusive Possession & Restraining Order
[44] The Applicant and the Respondent both offered that the Applicant would have exclusive possession of the matrimonial home pending sale.
[45] The Applicant also sought a restraining order against the Respondent which I declined to grant. This issue was not canvassed in either offer to settle.
(v) Summary
[46] Although not addressed in the offers to settle, a considerable amount of time at trial was spent on the issue of the date of separation. I found in favour of the Applicant on this issue.
[47] The other time-consuming issue was the value of the Respondent’s business. There were several witnesses called to give evidence and each of the parties spent considerable time speaking to this issue. Despite the significance in terms of dollar value of the business, the Respondent declined to commission a valuation report to assist the court. The Applicant had complete success with respect to this issue.
[48] Neither party was successful relative to the offer to settle. Neither offer contained severable financial terms. The Applicant chose to bundle together support and equalization along with a support release. The Respondent continued to assert that his business had no value and he was overreaching in terms of the quantum of spousal support.
[49] When applying the contextual analysis referred to in Jackson, including examining the parties’ trial positions as well as their offers to settle, there was some divided success. The Applicant was significantly more successful with respect to the court’s findings on equalization. These issues were more time consuming than others as they involved first a determination of the date of separation and then an assessment of the various disputed issues — the most significant and time consuming of which was the value of the Respondent’s business. There was also a fair amount of trial time devoted to determining the nature of the support claim (compensatory versus needs based) including evidence from a number of witnesses regarding the roles played by the parties during the marriage among other things. Neither party enjoyed complete success with respect to this issue. I did not order a lump sum or dismiss the prospective support claim as requested by the Applicant but I ordered time limited spousal support based on the Applicant’s income as of the date of separation. Overall, I find that the Applicant is marginally more successful than the Respondent.
(b) Reasonableness of the Parties
[50] Rule 24(4) of the Family Law Rules states that a court can sanction unreasonable conduct through an award of costs.
[51] Rule 24(5) provides criteria for determining the reasonableness of a party’s behaviour in a case as follows:
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.
[52] The Applicant’s position with respect to the date of separation and the value of the business was more reasonable than that of the Respondent and the latter issue in particular had a significant impact on equalization.
[53] As I noted in my trial decision, the Respondent’s position on the date of separation was more wilful than realistic. This issue took up significant trial time as each party called a number of witnesses to address it. Furthermore, the date of separation had negligible financial benefit for the Respondent. Had I found in his favour, it would have extended the quantum and duration under the SSAG somewhat, but the evidence did not necessarily support a lower value for his business even on his date of separation.
[54] The Respondent was also unreasonable in that he declined to obtain (or produce) a valuation of his business despite being granted an adjournment and funds to do so. Rather, he opted to try to make his case through the documents and through a number of lay witnesses.
[55] The Applicant was less reasonable in her position on a number of equalization issues. For example, she declined to state her position on a number of the Respondent’s net family property values including the value of his home owned on the date of marriage; she listed her position as “TBD”. This approach made it difficult to determine how far apart the parties really were and consequently how much trial time should reasonably be devoted to an issue.
[56] The Applicant was seeking an equalization payment of almost $112,000. The Respondent was seeking an equalization payment payable to him in excess of $200,000. I ordered the Applicant to make an equalization payment of just under $2,000.
[57] Each party lessened the utility of his/her offer to settle by not making parts of the offer severable: see J.C.M. v. K.C.M., 2016 ONCJ 551.
[58] The Applicant’s offer to settle was unreasonable in that she blended various issues into a lump sum payment. This made the offer more difficult for the Respondent to assess and compare to his own position and more difficult for the court to weigh in this analysis. Her requirement for a dismissal of the spousal support claim, having regard to the prevailing law, was unrealistic.
[59] The Respondent’s offer to settle was reasonable in some respects including his proposal for his imputed income and his offer to share the carrying costs on the matrimonial home.
[60] Each party was reasonable in some respects and less reasonable in others. However, in terms of the time spent at trial, the Respondent’s position with respect to the date of separation and the value of his business weighs against him in this aspect of the overall analysis.
[61] The apparent conflict between the parties did not, at least to the court’s eyes, carry over to counsel who should be commended for working cooperatively with each other during the trial to attempt to narrow the issues and to assist the court.
(c) Factors in Setting the Amount of Costs
[62] The Applicant was the successful party and she is entitled to some costs.
[63] Rule 24(12) of the Family Law Rules sets out a number of factors to be considered in determining the quantum of costs as follows:
(a) the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues:
(i) each party’s behaviour,
(ii) the time spent by each party,
(iii) any written offers to settle, including offers that do not meet the requirements of rule 18,
(iv) any legal fees, including the number of lawyers and their rates,
(v) any expert witness fees, including the number of experts and their rates,
(vi) any other expenses properly paid or payable; and
(b) any other relevant matter.
[64] I have discussed the reasonableness of each party’s behaviour above.
[65] Neither party’s offer met the criteria of r. 18(14) and for the reasons I have set out above, I do not find that the offers to settle tip the scales significantly in favour of either party in terms of costs pursuant to r. 18(16) or r. 24(12)(a)(iii) of the Family Law Rules.
[66] The fees claimed by the Applicant are $74,622.80 (80% of actual fees) for the period before the offer to settle and $66,664.50 (at 100%) for the period after the offer to settle exclusive of HST and disbursements.
[67] The Respondent stresses that the Applicant’s claim for costs is overstated in that it includes time billed in relation to custody and access issues that were settled (including costs thereof) on the eve of trial after the assessment report was released. From the evidence received at trial, it was clear that the parenting issues were a significant and high conflict issue for the parties prior to the settlement.
[68] The Applicant’s previous lawyer charged her approximately $32,000 according to the Bill of Costs. However, the docket entries from the Applicant’s previous lawyer do not contain sufficient detail to determine if they relate all or in part to custody and access issues. The docket entries produced by Mr. Moldaver do reflect work done primarily with respect to the financial issues.
[69] Overall, the time spent by the Applicant’s counsel, Mr. Moldaver, was reasonable and appropriate given the nature of the issues and the length of the trial. This is not to suggest that Ms. Neilson’s time billed was otherwise, simply that I have discounted the amounts billed by her as I cannot isolate the fees related to the financial issues.
[70] Mr. Moldaver’s rate of $600/hour is on the high side for a lawyer of his year of call (1999). However, the work performed by his firm on behalf of the Applicant was shared with a junior lawyer and a law clerk both of whom had lower billing rates.
[71] The issues in this case, including the Respondent’s entitlement to spousal support, were somewhat complex and important. The issue of the value of the Respondent’s business could have been less complex had a business valuation been produced. The issue of the date of separation took on undue importance to both parties and too much trial time was consequently devoted to it given its modest impact on the financial outcomes.
[72] I find the disbursements claimed of $5,964.17 inclusive of HST reasonable.
[73] One of the considerations in an assessment of costs is to fix costs in an amount that is “fair and reasonable” for the unsuccessful party to pay in a particular proceeding: Farjad-Tehrani v. Karimpour (2009), 2009 18882 (ON SC), 64 R.F.L. (6th) 375 (Ont. S.C.), at para. 32, aff’d 2010 ONCA 326, 83 R.F.L. (6th) 17, at para. 4. In coming to this determination it is often helpful to refer to what was paid by the unsuccessful party to his/her lawyer. In this case, the Respondent did not provide his own bill of costs. However, Mr. Slan is a very experienced family law lawyer and it is reasonable to infer that the Respondent was well aware of the quantum of costs that would be sought by the Applicant in the event she was successful at trial.
[74] In summary, the Applicant was more successful overall than was the Respondent, but she did not enjoy complete success. The offers to settle, particularly the fact that they were not severable, did not assist either party with respect to costs. The Respondent contributed to the overall cost of the proceeding to a greater extent than did the Applicant by taking a less reasonable position on the date of separation and the value of his business. While the amount billed to the Applicant by both Ms. Neilson and Mr. Moldaver’s firm was reasonable, this is not a case for costs that approach full recovery.
[75] Having regard to all of the foregoing, the Respondent shall pay costs of $30,000 inclusive of HST and disbursements from his share of the net sale proceeds of the matrimonial home.