COURT FILE NO.: FS-09-4856 DATE: 2018 11 20 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
QUIRINO PESCARINO Robert Kostyniuk, for the Applicant Applicant
- and -
NANCY SPENCER Jesse Schmidt, for the Respondent Respondent
HEARD: December 17, 2013 Price J.
COSTS ENDORSEMENT
OVERVIEW
1This costs endorsement will address the costs of a successful motion by Nancy Spencer to set aside the final Judgment of Seppi J. dated May 18, 2012, obtained against her by her former common law spouse, Quirino Pescarino, in default of an Appearance by Ms. Spencer. Mr. Pescarino makes separate claims for his costs of the motion and his wasted costs of the proceeding in which the default judgment was issued.
BACKGROUND
2Mr. Pescarino and Ms. Spencer resided in a common law relationship at 927 Aviation Road in Port Credit (“the Aviation Road Property”), which Ms. Spencer owned. Mr. Pescarino and Ms. Spencer separated in August 2008.
3Following the parties’ separation, Ms. Spencer sold the Aviation Road property and with the proceeds, purchased a property at 3 Alderbury Crescent, Mississauga (“the Alderbury Crescent property”). On June 25, 2009, Ms. Spencer sold the Alderbury Crescent property and traveled to Kimberly British Columbia, where she bought a restaurant, a restaurant property, and a residential property.
4Mr. Pescarino retained a lawyer, Mr. Kostyniuk, to assert a claim against Ms. Spencer for a constructive trust interest in the Aviation Road Property, based on what he said was an increase in Ms. Spencer’s equity that had resulted from his investment of money and labour in the property when the parties lived there. Mr. Kostiniuk sent a written notice of Mr. Pescarino’s claim to Ms. Spencer on February 13, 2009 and March 10, 2009.
5Ms. Spencer retained a lawyer, D.F. Logan, to respond to Mr. Pescarino’s claim. Mr. Logan wrote to Mr. Kostiniuk on March 20, 2009, stating that he had been retained by Ms. Spencer. Mr. Logan negotiated with Mr. Kostyniuk from February to July 2009, in an effort to resolve the parties’ dispute.
6The lawyers’ negotiations were unsuccessful, and on June 25, 2009, Mr. Logan sent a letter to Mr. Kostyniuk, informing him that Ms. Spencer was withdrawing all previous offers. On July 30, 2009, Mr. Logan sent a letter to Ms. Spencer, notifying her that Mr. Kostiniuk had threatened to commence a proceeding against her by October 15, 2009, as he believed there was a limitation period which required that a proceeding be commenced before November 2009, the anniversary of the parties’ separation.
7Mr. Kostiniuk commenced a proceeding on behalf of Mr. Pescarino by an Application issued on October 21, 2009. When he was unable to have the Application personally served on Ms. Spencer, he sent a letter to Mr. Logan on December 14, 2009, asking him if he knew Ms. Spencer’s address and would accept service of the Application on her behalf. Mr. Logan responded, stating that he was not acting for Ms. Spencer, that he had no knowledge of her address, and threatening that any attempt to secure an Order for substituted service of the Application by delivery to his office would be strongly opposed, and would result in costs being sought against Mr. Pescarino and Mr. Kostiniuk.
8Through further investigation, Mr. Pescarino ascertained that Ms. Spencer had a brother in Milton and a father in Etobicoke. Their addresses were confirmed as current, and Mr. Pescarino made a motion for substituted service by mail addressed to Ms. Spencer at the addresses of her father and brother. On February 22, 2010, Lemon J. made the Order requested.
9When no response was received by or on behalf of Ms. Spencer, Mr. Kostiniuk caused her to be noted in default and obtained from the Registrar a date for a trial of the issue of damages. Mr. Kostiniuk also obtained an Order for the production of the real estate files for the sale of the Aviation Road property and for the purchase and sale of the Alderbury Crescent property. He presented that evidence, as well as Mr. Pescarino’s sworn testimony, at a trial on May 18, 2012, before Seppi J. Justice Seppi issued a final Judgment awarding Mr. Pescarino $120,000.00 plus pre-judgment interest, being half the increase in equity that Mr. Pescarino alleged Ms. Spencer had derived from his investment of money and labour.
10Justice Seppi’s Judgment was taken out and a Writ of Seizure and Sale was obtained and filed in Ontario. Later, location searches were conducted in the Province of British Columbia. To enforce the Ontario Judgment in British Columbia, an Order was obtained from the B.C. Supreme Court, recognizing the Ontario Judgment. A Writ of Seizure and Sale was then obtained in British Columbia, and a lawyer was retained in the Town of Kimberly to file the Writ of Seizure and Sale and conduct a Judgment Debtor examination of Ms. Spencer.
11When served with the Notice of Judgment Debtor Examination, Ms. Spencer moved to set aside the default judgment against her. In her supporting affidavit, she stated that she had moved from Ontario to British Columbia on July 1, 2009, and did not hear anything from Mr. Pescarino or his lawyer, or from Mr. Logan, after July 29, 2009, and “assumed that the issue had been dropped and that the Applicant and I could move on with our respective lives.”
12After hearing Ms. Spencer’s motion, this Court made an Order on December 17, 2013, setting aside the default judgment against her. The Court stated that Ms. Spencer’s assumption that the issue was dropped was an unwarranted one, having regard to the letter she had received from Mr. Logan dated July 30, 2009, notifying her of the impending action. The Court held that it was Ms. Spencer’s obligation either to notify Mr. Pescarino or his lawyer that Mr. Logan was no longer acting on her behalf or to keep in contact with Mr. Logan’s office from July 30 to November 2009, as she had authorized him to negotiate on her behalf with Mr. Pescarino’s lawyer with a view to effecting a resolution of the issues.
13Ms. Spencer stated that Mr. Logan knew her address in British Columbia, as he had acted for her in the sale of the Alderbury Crescent property, and had met with her in late November 2009. In its reasons dated December 17, 2013, this Court found, based on Ms. Spencer’s evidence, that she had not instructed Mr. Logan to notify Mr. Kostyniuk that she had withdrawn his authority, or instructed him not to provide her forwarding address or to accept service of an Application on her behalf. Ms. Spencer stated that she did not know why Mr. Logan did not provide her address to Mr. Kostyniuk. She believed that Mr. Logan retired sometime in 2010 or 2011 and she had been unsuccessful in obtaining her files from him. Her current lawyer, Mr. Streiman, had informed her that the Law Society had confirmed that Mr. Logan was retired and had not consented to providing his contact information to his former clients.
14With regard to Lemon J.’s Order dated April 10, 2010, for substituted service of the Application on Ms. Spencer by mailing a copy to her at the address of either or both of her father or her brother, Ms. Spencer stated that her father was in hospital when the Application was mailed to his residence, and died two days after the service of it at that address, and that her brother, with whom she says she did not often speak, did not know where she was living and did not forward the Application to her. His wife advised that she returned the envelope after writing on it, “Not at this address”.
15On the basis of Ms. Spencer’s sworn evidence, this Court was satisfied that her default in responding to Mr. Pescarino’s Application, which she said she never received, was adequately explained. In setting aside the default judgment against her, the Court stated:
- As it appears from the material filed that Mr. Logan may have caused the costs of the default judgment and the present motion to be increased without reasonable cause, by negligence or other default, I will direct that notice may be given to Mr. Logan that the court will, if requested, consider making an Order pursuant to Rule 57.07(1) of the Rules of Civil Procedure requiring Mr. Logan to pay the costs of Mr. Pescarino, or of Ms. Spencer, or both, in relation to the default judgment proceeding and the present motion.
16Notwithstanding the above term of the Order, and the fact that the Order was silent regarding costs, the parties apparently took no steps to notify Mr. Logan or make a claim against him, and instead submitted written arguments in August 2017, claiming their costs from each other. This endorsement will therefore address that issue.
POSITIONS OF THE PARTIES
17Mr. Pescarino claims both his costs of the motion and his wasted costs of the proceeding on a substantial indemnity scale. He states that his costs of the motion were $16,001.55, on a partial indemnity scale, and $21,023.86, on a substantial indemnity scale. His wasted costs of the proceeding, he says, were $19,862.38, on a partial indemnity scale, and $24,484.75, on a substantial indemnity scale.
18Ms. Spencer seeks her costs of her motion to set aside the default judgment of Seppi J., the temporary order of Lemon J. for substituted service, and the temporary Order of MacKenzie J. dated December 17, 2010, on a full recovery basis. She relies on her presumptive entitlement to costs based on her success in the motion.
19In seeking her costs on a full recovery basis, Ms. Spencer submits that the outcome of the motion, which was silent as to costs, was more favourable than either of two Offers to Settle that she served on Mr. Pescarino. Those Offers provided as follows:
(a) Her Offer to Settle dated October 25, 2013, proposed that the default judgement be set aside on terms whereby Ms. Spencer would pay Mr. Pescarino’s costs in the amount of $11,750.00 in instalments of $1,000.00 on the first of each month, until the full amount was paid.
(b) Her Offer to Settle dated December 13, 2013, proposed that the default judgment be set aside on terms whereby she would pay the costs of the Motion, fixed at $5,000.00, and that Mr. Pescarino’s costs thrown away would either be paid by Ms. Spencer in the amount of $11,750.00 or would be referred to the Trial Judge, and any costs payable by her would be paid at the rate of $1,000.00 per month. She offered that the Certificate of Judgment registered in the Supreme Court of British Columbia would remain in place until Mr. Pescarino’s action had been determined by settlement or adjudication, and that she would sign a direction authorizing Mr. Logan and the Law Society to release Mr. Logan’s file to Mr. Pescarino’s lawyer.
20Ms. Spencer’s Bill of Costs sets out her costs, on a full recovery basis, of $24,516.84, inclusive of HST and disbursements.
ANALYSIS AND EVIDENCE
a) General principles
21A successful party is presumed to be entitled to his or her costs, pursuant to Rule 24(1) of the Family Law Rules. The preferable approach in family law cases is to allow costs on a full recovery basis, provided the successful party acted reasonably and the costs claimed are proportional to the issues and results and were within the range that the opposing party should have expected if unsuccessful in the motions. [1]
22Costs Orders are designed to achieve three principal purposes, (a) to indemnify successful litigants; (b) to sanction unreasonable conduct of the litigation; and (c) to encourage settlement. [2]
23A litigant whose conduct was reasonable and who is successful in a proceeding should not be required to bear the costs of having her rights tested. [3] However, an unsuccessful litigant should not be required to pay the costs of a motion that the successful litigant precipitated by her unreasonable conduct, or be so heavily burdened with costs as to discourage other litigants from submitting issues to the court where the outcome is not a foregone conclusion that should have been anticipated.
24Historically, the successful party in a motion made necessary by the responding party’s breach of a court order was entitled to costs on a substantial indemnity scale. [4] This was because a finding of contempt is a finding of unreasonable conduct. Substantial indemnity costs did not follow automatically or invariably from a finding of contempt, but such a finding gave rise to a rebuttable presumption that the successful party was entitled to costs on a substantial indemnity scale. In Astley v. Verdun, 2013 ONSC 6734, Goldstein J. described the jurisprudence governing the imposition of substantial indemnity costs as it pertains to contempt, He 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. [5]
[Emphasis added]
25The Family Law Rules do not explicitly provide for costs on either a partial or substantial indemnity scale. Rule 18(14), dealing with the costs consequences of a failure to accept an Offer to Settle, instead differentiates between “costs” and “full recovery of costs”. Rule 24(8) also 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. [6] It has a range of costs awards open to it, from nominal to just short of full recovery.
26In Sims-Howarth v. Bilcliffe, 2000 ONSC 22584, (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. [7] Justice Aston 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., 2003 ONCA 18880. [8]
27In Berta v. Berta, 2015 ONCA 918, (2015), the Court of Appeal stated:
In Biant v. Sagoo (2001), 2001 ONSC 28137, 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.), 2003 ONCA 18880, 67 O.R. (3d) 181 (C.A.), at para. 40. [9]
28Costs 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 conduct will result in a higher award of costs. In Perri v. Thind, 2009 ONSC 34977, (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. [10] 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. [11]
29Rule 24(8) of the Family Law Rules explicitly authorizes the Court to employ a costs order to sanction unreasonable conduct. It provides:
24(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.
30Additionally, a successful litigant may be deprived of costs in certain circumstances, including where he has conducted the litigation in an unreasonable manner. Rule 24(4) of the Family Law Rules provides, in this regard:
24(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 behavior in relation to the issues from the time they arose, including whether the party made an offer to settle …; [12]
[Emphasis added]
b) Applying the principles to the facts of the present case
(i) Liability for costs
31Ms. Spencer was successful in the outcome of the motion and is presumptively entitled to her costs. I find no unreasonable conduct by her that that disentitles her to her costs.
32Mr. Pescarino does not explicitly claim his costs against Ms. Spencer. He states, in his costs submissions:
- Costs thrown away by the Applicant and costs of the motion are recoverable by the Respondent from Mr. Logan if, as she alleges, her former lawyer was negligent, and was directly, or indirectly, responsible for the Applicant’s costs thrown away, his costs of the motion, and her costs of the motion! Indemnity may be pursued as Mr. Logan’s Ottawa counsel has been fully apprised of the Respondent’s allegation by applicant’s counsel, not by the Respondent.
33While Ms. Spencer may have a claim against Mr. Logan for her own costs of the motion and for indemnification for any costs order that is made against her, that fact alone does not justify making an costs order against her, either in the motion or in the proceeding. Neither Ms. Spencer nor Mr. Pescarino made Mr. Logan a party to the motion, or notified him of an intention to claim costs against him, notwithstanding that they were given leave to do so. Without Mr. Logan being a party, or at least being given notice, it would not be fair to make a costs order against him. Yet, without his evidence, or some other evidence contradicting Ms. Spencer’s assertions, there is also no basis for making a costs order against her.
34Mr. Pescarino implies that Ms. Spencer may be lying when she asserts that she had no knowledge of the Application. He states, in his costs submissions:
- It is highly unlikely that a lawyer with the considerable family law experience of David Logan, who also acted on the sale of 3 Alderbury, and according to the Respondent’s sworn testimony, and (sic) had met with the Respondent in late November 2009, probably to review the status of the Applicant’s claim, would not have advised her of the probability of an Application. At the very least, after being advised shortly thereafter that an Application had in fact been issued, he would have advised his client of same. There’s no explanation of why the respondent’s counsel would state he had no idea of his client’s address, unless he was so instructed. Mr. Logan’s file remains undisclosed, despite an undertaking from the Respondent at her Cross-Examination that she would make her best efforts to secure Mr. Logan’s file, and/or, would execute a Direction permitting the Applicant’s counsel to do so. This undertaking and Direction remain outstanding. Mr. Logan’s file(s) have not been produced.
35I am not prepared to find that Ms. Spencer instructed Mr. Logan to lie for her to Mr. Kostiniuk based solely on the fact that Mr. Kostiniuk asserts that Mr. Logan told him that he did not know her address and that Ms. Spencer states that he did know it. Mr. Kostiniuk argues, in effect, that the Court should accept Ms. Spencer’s evidence that Mr. Logan knew her address (which she could have denied), but that it should reject her evidence that she did not withdraw his authority to act for her, or instruct him to lie for her, or refuse to accept service of the Application on her behalf, and that she asked Mr. Logan in November 2009 if anything had transpired with Mr. Pescarino’s claim and that he replied no.
36Whether Mr. Logan did, in fact, know Ms. Spencer’s address and, if he did, why he told Mr. Kostiniuk that he did not, is a fact that can only be determined through an examination of Mr. Logan or production of his file. Similarly, if Ms. Spencer withdrew his authority to act for her, or instructed him to lie for her regarding his knowledge of her address, that also is a fact that can only be determined from Mr. Logan or his file.
37Clearly, Ms. Spencer, in disclosing her discussions with Mr. Logan, has waived her claim to solicitor/client privilege over their communications. Mr. Pescarino was given leave to notify Mr. Logan that an Order for costs could be made against him, and he appears to have chosen not to involve him. Mr. Pescarino states that Ms. Spencer undertook to produce Mr. Logan’s file, but he appears not to have taken any steps to compel her to do so. He also appears not to have taken steps to examine Mr. Logan as a non-party, or to compel production of his file from him.
38Mr. Pescarino, in his costs submissions, casts doubt on Ms. Spencer’s evidence that she was not informed by her stepmother or brother that an envelope had arrived for her (containing Mr. Pescarino’s Application). He states:
It is difficult to believe that the Respondent…had not been advised by her stepmother, or her brother, that copies of the Application contained in envelopes, directed to her attention had been received, c/o her father, and her brother.
The Respondent testified that she attended her father’s funeral several days after the substituted service by mail had been made. She would certainly have been in immediate contact with her stepmother and brother, leaving it difficult to believe that neither would have advised her of the urgent, important, correspondence directed to her c/o her father, and her brother, had been received shortly before her death.
39Mr. Pescarino has apparently not sought to examine Ms. Spencer’s stepmother, or her brother, or her brother’s wife, as non-parties. In the absence of such examination of them, this Court has no basis for concluding that Ms. Spencer is lying when she gives evidence, as yet uncontradicted, that her brother’s wife informed her that her brother returned the envelope marked, “Not at this address”.
40In the absence of such evidence, which only Mr. Logan and Ms. Spencer’s brother and his wife can provide, and in the absence of steps taken by either of the parties to question them, this Court is not prepared to find that Ms. Spencer conducted herself unreasonably, or to make a costs order against her. To do so would be contrary to the finding this Court made in its reasons in 2013, to the effect that Ms. Spencer had given an adequate explanation for her failure to respond to the Application.
41Based on the foregoing, I find that Ms. Spencer is entitled to her costs of the motion to set aside the default judgment against her, and that Mr. Pescarino is not entitled to his wasted costs of the Application, except insofar as those costs form part of the costs of the proceeding, and are recoverable, in the discretion of the trial judge, based on the outcome of the trial.
(ii) The appropriate scale of costs
42As noted above, the Court of Appeal in Biant v. Sagoo (2001), 2001 ONSC 28137, held that “[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.” While there remains a discretion under Rule 24(1) to award the amount of costs that appears just in all the circumstances, that discretion should be exercised in a way that gives effect to the rules’ preeminent presumption, and subject to the rules that require full recovery or that require or suggest a reduction or an apportionment.
43Ms. Spencer achieved an outcome that was as or more favourable than if Mr. Pescarino had accepted either of her Offers to Settle. In those circumstances, it was unreasonable for Mr. Pescarino not to have accepted her Offers and to have opposed her motion without taking the necessary steps to establish that the Application had come to her attention and that she had acted unreasonably in failing to respond to it.
(iii) The amount of costs
Factors to be considered
44Rule 24(11) of the Family Law Rules lists the factors which the court should consider in 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.
45I will now turn to consider each of these factors in relation to Ms. Bullock’s claim for costs.
(a) Importance, Complexity and Difficulty
46Among motions to set aside a default judgment, this one was relatively straight-forward. It was determined based on Ms. Spencer’s uncontradicted evidence that the Application never came to her attention. It did not require a determination as to the merits of Ms. Spencer’s response to the Application.
(b) Reasonableness of Each Party’s Behaviour
47In the normal course, costs are awarded to a successful litigant on a partial indemnity scale, representing approximately 60% of the successful litigant’s total legal fees and disbursements; however, the court has the discretion to order costs to be paid on a substantial indemnity scale (partial indemnity costs x 1.5 = 90%) [13] or, especially in cases where there has been unreasonable conduct, on a full recovery basis. [14]
48As noted above, Mr. Pescarino’s failure to accept Ms. Spencer’s Offers entitles Ms. Spencer to her costs on a full recovery scale. Sub-rules 24(5) and 24(11)(b) explicitly recognize that costs may be used to express the court’s disapproval of a litigant’s unreasonable conduct, and that the Court may consider a party’s failure to make, or accept, an Offer to Settle in assessing the reasonableness of their conduct. In the present case, the fact that Ms. Spencer made reasonable Offers to Settle, which were not accepted, supports a finding that she is entitled to her costs on a full recovery basis.
(c) Lawyer’s rates
36Ms. Spencer claims an hourly rate of $325.00 for her lawyer, Frederick Streiman, who was called to the Bar in Ontario in 1978, and had practiced Family Law for over 35 years when Ms. Spencer’s motion was argued. Mr. Streiman was assisted by Marvin Kurz, who was called to the Bar in 1983, and had practice law for 33 years, and by Rachel Jansen, who were called in 2012, and by Law Clerks and a Paralegal.
37The “Information for the Profession” bulletin, from the Costs Sub-Committee of the Rules Committee (“the Costs Bulletin”) [15], suggests maximum hourly rates (on a partial indemnity scale) of $350.00 for lawyers, such as Mr. Streiman and Mr. Kurz, with over 20 years’ experience.
38The Costs Bulletin, published in 2005, is now dated. It is therefore appropriate to make an adjustment to the rates suggested in the Costs Bulletin based on inflation. Smith J. took this approach in First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359. Mr. Streiman’s and Mr. Kurz’s partial indemnity rate of $350.00 in 2005 was the equivalent of $398.11 in 2013, when the motion was argued, according to the Bank of Canada’s online Inflation Calculator. I am rounding that amount up to $400.00. Their rates, on a substantial indemnity scale, using the multiple of 1.5 prescribed by Rule 1 of the Rules of Civil Procedure, [17] were $600.00. Ms. Jansen, as a lawyer with under 10 years’ experience, was entitled to claim a maximum rate of $225.00 on a partial indemnity scale in 2005, which translates to $255.93 in 2013, which I am rounding to $255.00. On a substantial indemnity scale, that is the equivalent of $382.50.
39Aitken J., in Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, allowed the Defendants/Respondents’ costs of an appeal from a Master’s order on a partial indemnity scale in the amount their lawyer had charged. [18] She rejected the Plaintiffs/Appellants’ argument that the Respondents should be awarded less than they had been charged because the parties had agreed that costs would be paid on a partial indemnity scale. Aitken J. began by considering the Costs Bulletin. She considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she used their unadjusted rates. [19]
40Although Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041 was a civil action, the approach that Aitken J. took in that case applies equally in the family law context. The court adjusts the hourly rate, based on the Costs Bulletin, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 24. If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly.
41Aitken J. makes it clear that the starting point in arriving at an appropriate hourly rate when fixing costs is the Costs Bulletin, not the actual hourly rate the lawyer charged her client. The actual rate charged is irrelevant, except as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged, in keeping with the principle of indemnification. [20] The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same place.
42In Mantella v. Mantella, 2006 ONSC 17337, (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. [21] The Divisional Court, in Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, adopted Corbett J.’s analysis in Mantella, holding that it was not trumped by earlier jurisprudence from the Court of Appeal. [22] Mr. Streiman’s actual rate is $400.00; Mr. Kurz’s rate is $475.00; and Ms. Jansen’s is $225.00, which are less than the maximum rates they could claim on a substantial indemnity scale, are reasonable, especially having regard to the fact that Ms. Spencer is entitled to her costs on a full recovery basis.
(d) Time reasonably spent
43Ms. Spencer’s lawyers spent a total of 55.5 hours on the motion up to the time of the hearing. Mr. Streiman spent 15.35 hours of that time, Mr. Kurz, less than an hour, and Ms. Jansen 39.95 hours, and their Law Clerk spent 18.16 hours. The time included drafting the Notice of Motion and the affidavits of Nancy Spencer, Gail Spencer, Kevin Larose, and Richard Hack, and Ms. Spencer’s Financial Statement, attendance at the questioning of Ms. Spencer, and of Mr. Pescarino, drafting a Factum and Brief of Authorities, and preparing for the hearing.
44Mr. Pescarino’s lawyers spent less time in total, 41 hours, but 35.8 hours of that were spent by Mr. Kostiyniuk, who was called to the Bar in 1968, and commanded a higher hourly rate. Only 5.2 hours of the work was delegated to his Associate, Galyna Pribytkova, who was called in 2011. Because most of the time was spent by the most senior lawyer on Mr. Pescarino’s team, his lawyers’ legal fees for the motion amounted to $14,995.00, only 18.8% less than the $17,817.50 charged by Ms. Spencer’s lawyers. It is not surprising that Ms. Spencer’s costs would be higher, as the onus was on her to establish the evidentiary and legal basis for setting aside the default judgment.
45Based on the oral argument and motion material filed, I find that the time spent on behalf of Ms. Spencer was reasonable and necessary.
(e) Expenses properly payable
46The disbursements claimed by Ms. Spencer, which amount to $1,221.32, include over $750.00 paid to Peel Reporting Services for the out-of-court questioning. The disbursements are $900.00 less than those made by Mr. Pescarino’s lawyers. Mr. Pescarino does not challenge the disbursements, which will be allowed at the amounts claimed.
(f) Other Relevant Matters - proportionality
47I have considered the proportionality of the costs that Ms. Spencer has claimed. The principle of proportionality was added to the Rules of Civil Procedure by the amendment of Rule 1.04, which I apply by analogy to the present motion as there is no equivalent provision in the Family Law Rules. Rule 1.04 directs that the Rules be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” Sub-Rule 1.1, which was added, provides:
(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. O. Reg. 438/08, s. 2.
48Mr. Streiman did not “over-lawyer” the motion. The time he and Ms. Jansen spent was reasonably necessary to prosecute the motion to a successful outcome. The costs claimed are proportional to the amount at stake, having regard to the fact that the judgment being set aside amounted to $120,000.00.
(c) What is fair and reasonable
49I must, at this point, 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 making this determination, I take into account the reasonable expectation of the parties concerning the amount of costs. [23]
50Mr. Pescarino incurred 80% of the costs that Ms. Spencer did and was unsuccessful in the outcome.
51Awards of costs in motions to set aside default judgments vary depending on their factual complexity, and on the extent to which they are opposed. I have considered the following costs awards made in similar cases, which should have informed Mr. Pescarino’s expectations as to the costs he might be required to pay if he was unsuccessful in opposing the motion:
(a) In Casino v. Pang, 2009 ONSC 26919, Roberts J., as she then was, awarded $1,000.00 on a motion to set aside default judgment.
(b) In Somerville v. Bank of Montreal, 2012 ONSC 5437, at para. 6, Stimson J. awarded a defendant costs on a substantial indemnity scale in the amount of $9,500.00 for a motion to set aside the noting in default, based on a finding of unreasonable conduct by the plaintiff;
(c) In Kim v. Kim, 2014 ONSC 2812, O’Marra J. dismissed a motion for payment of costs of $2,500.00 in the cause by Master McPhee in a motion to set aside a noting in default, holding that the defendant would not be entitled to enforce those costs unless and until he was successful at trial.
(d) In Emamghorashi v. Nateghi, 2003 ONSC 2306, Ellen Macdonald, J. awarded the respondent costs of $1,500.00 on a motion to set aside default judgment.
(e) In Farzana v. Abdul-Hamid, 2015 ONSC 4985, this Court awarded costs of $5,861.91, including HST and disbursements, to the defendant in a successful motion to set aside default judgment.
52While the awards in the above-mentioned cases were lower than those claimed by Ms. Spencer, the higher costs claimed by her are justified by the fact that she made two reasonable Offers to Settle which were not accepted, thereby entitling herself to her costs on a full recovery basis, and by the fact that there were cross-examinations on the affidavits filed, which added to the costs. On that basis, and having regard to the costs that Mr. Pescarino paid his own lawyers for the motion, I find that the costs claimed by Ms. Spencer are within the range of what Mr. Pescarino should reasonably have expected to pay if unsuccessful in opposing the motion.
53There is an element of behaviour modification to a costs order serving to encourage a change in attitude from a “litigate with impunity” mindset. [24] In Mooney, Curtis J. made the following observations, which I adopt:
Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly for the purposes of this case, oblivious to the mounting costs of the litigation: Heuss v. Sarkos, 2004, Ont. Ct., supra, para. 20.
Matrimonial litigation is an occasion for sober consideration and thoughtfulness rather than intemperate behaviour: Heuss v. Sarkos, 2004, Ont. Ct., supra, para. 20.
One of the purposes of costs is to change behaviour. The justice system is a precious public resource. Access to the justice system by individuals must be balanced with the need to ensure that the resource is available for all those who need it. This is one of the purposes of Rule 2.
Unless courts discourage this behaviour, it will continue and increase. Orders for costs are one way to discourage this behaviour. [25]
54The Family Law Rules, like the Rules of Civil Procedure, are, pursuant to Rule 1.04(1) of the latter, to be liberally construed to secure the just, most expeditious and least expensive determination of every proceeding in its merits. While failing to respond to an Application in order to gain a strategic advantage or game the system may be expected to result an adverse outcome, with the attendant costs, in a motion to set aside a default judgment, the opposing of such a motion without reasonable cause, in order to deprive a respondent unfairly of her right to a determination of the proceeding on its merits, may be expected to hold a similar outcome for the responding party.
CONCLUSION AND ORDER
55For the foregoing reasons, it is ordered that:
Mr. Pescarino shall forthwith pay Ms. Spencer’s costs of the motion, fixed in the amount of $25,516.84, inclusive of fees, HST, and disbursements.
Mr. Pescarino’s claim for his wasted costs of the proceeding is dismissed, without prejudice to his right to claim those costs in the cause from the trial judge.
These costs of the motion shall be paid with 3% post-judgment interest from today’s date.
Price J.
Released: November 20, 2018
Footnotes:
1Family Law Rules, O Reg. 114/99, Rule 24(1); Sims-Howarth v. Bilcliffe, 2000 ONSC 22584, para. 11; Biant v. Sagoo, 2001 ONSC 28137, para. 1
2Paranavitana v. Nanayakkara, 2010 ONSC 2257
3Serra v. Serra, 2009 ONCA 395
4Cassidy v. Cassidy, 2011 ONSC 791, para. 14; Astley v. Verdun, 2013 ONSC 6734, at paras 52 to 58
6Sordi v. Sordi, 2011 ONCA 665, 283 O.A.C. 287.
7Sims-Howarth v. Bilcliffe, 2000 ONSC 22584, [2000] O.J. No. 330 (S.C.J.)
8C.A.M. v. D.M., 2003 ONCA 18880, [2003] O.J. No. 3707 (C.A.), at para. 42.
9Berta v. Berta, 2015 ONCA 918, at paras. 92-93.
10Perri v. Thind, 2009 ONSC 34977, (2010), 98 O.R. (3d) 74 (S.C.).
11Perri, at paras. 24-26, 32-33.
12O.Reg. 114/99 as am.
13Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 1, as authorized by Family Law Rules, Rule 1(7)
14Feinstein v. Freedman, 2014 ONCA 446 at para. 21; 131843 Canada Inc. v. Double “R” Toronto Ltd. (1992) 7 C.P.C. (3d) 15 (Ont. Gen. Div., per Blair J., as he then was) at p. 17, approved in [Murano v. Bank of Montreal, 1998), (1998) 41 O.R. (3d) 222 (C.A.) at p. 244
15“Information for the Profession” bulletin (“the Costs Bulletin”) from the Costs Sub-Committee of the Rules Committee (that the Costs Sub-Committee of the Rules Committee issued to replace the Costs Grid, which it repealed in 2005). The Costs Bulletin has advisory status only and not statutory authority, as it was not included in the Regulation that repealed the Costs Grid.
16First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359
17Rules of Civil Procedure, R.R.O. 1990, Reg. 194
18Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041
19Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041
20The principle that costs should not exceed the amount charged was articulated by Corbett J. in Mantella v. Mantella, 2006 ONSC 17337, (2006), 27 R.F.L. (6th) 76 (S.C.J.), subsequently approved by Aitken J., sitting as a Divisional Court judge in Geographic Resources.
21Mantella v. Mantella, 2006 ONSC 17337, (2006), 27 R.F.L. (6th) 76 (S.C.J.)
22Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041
23Referring to: Boucher v. Public Accountants Council for the Province of Ontario, 2004 ONCA 14579, [2004] O.J. No. 2634 (C.A.) (released June 22, 2004); Moon v. Sher, [2002] O.J. No. 4651 (C.A.) (released November 16, 2004); and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 ONCA 1042, [2005] O.J. No. 160 (C.A.) (released January 24, 2005)
24Parsons v. Parsons, 2002 ONSC 45521, at para. 14, Campbell J.
25Mooney, at paras. 30-34.