Court File and Parties

COURT FILE NO.: FS-17-0100-00 DATE: 2018-11-26

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Karen Schneidermeier Applicant

T. Matthews, for the Applicant

• and -

Gary Bernosky Respondent

B. Smith, for the Respondent

HEARD: Via Written Submissions Mr. Justice D.C. Shaw

Decision On Costs

[1] This is a decision on costs. The issue at trial was whether income should be imputed for the purposes of spousal support.

[2] Following a three day trial, I determined that the applicant, Karen Schneidermeier, had not satisfied the onus on her to prove, on a balance of probabilities, that the respondent, Gary Bernosky, was intentionally unemployed within the meaning of s. 19(1)(a) of the Federal Child Support Guidelines and the ratio in Drygala v. Pauli (2002), 61 O.R. (3d) 711 (C.A.). I did not impute income to Mr. Bernosky beyond the $821.00 per month that he was withdrawing from his RRIF.

[3] I dismissed the application for spousal support, without prejudice to Ms. Schneidermeier’s right to bring a claim for spousal support if there was a material change in the circumstances of Mr. Bernosky. Mr. Bernosky was ordered to continue to make reasonable efforts to obtain employment and to provide Ms. Schneidermeier by September 1, 2019 with evidence of his job applications during the previous 12 months, to notify her with details of any employment he obtained and to provide Ms. Schneidermeier by June 1 of each year, commencing June 1, 2019, with a copy of his income tax return and Notice of Assessment for the previous calendar year.

[4] I ordered that if the parties could not agree on costs, written submissions were to be provided. Those submissions have been received and reviewed.

[5] The solicitor for Mr. Bernosky presents a Bill of Costs, seeking “partial recovery” at 60% of “full recovery” to January 8, 2018, when Mr. Bernosky served an offer to settle, and “full recovery” after that date, for total fees of $42,615.20 and HST thereon of $5,539.00. He also claims disbursements of $2,015.65, plus HST of $262.03. The total of fees and disbursements, inclusive of HST, claimed by Mr. Bernosky is $50,432.80.

[6] The applicant submits that the appropriate quantum of costs payable to the respondent is in the range of $5,000.00 to $10,000.00, inclusive of HST and disbursements. The solicitor for Ms. Schneidermeier filed a Bill of Costs for comparative purposes showing $26,488.08 for fees, disbursements and HST on a full recovery basis.

[7] The Bill of Costs for Mr. Bernosky shows that his solicitor, Mr. Smith, recorded 115 hours at a full recovery rate of $310.00 per hour for total fees of $35,680.00. Mr. Smith has 25 years of experience. The Bill of Costs shows 88 hours for a law clerk of 38 years experience, at a full recovery rate of $160.00 per hour, for a total of $13,320.00. There is approximately a further $3,300.00 billed by another lawyer, several clerks and two law students.

[8] In his Bill of Costs, the solicitor for Ms. Schneidermeier, Mr. Matthews, shows that he recorded 86.2 hours at $200.00 per hour, for a total of $17,240.00. Mr. Matthews has four years experience. The Bill of Costs shows time entered for three other lawyers totalling approximately $2,300.00 for approximately 14 hours. It also shows 38.7 hours of law clerk time at $70.00 per hour for a total of $2,709.00.

[9] Effective July 1, 2018, amendments were made to the Family Law Rules, including amendments to Rule 24. I agree with Bloom J. in Kang v. Kang, 2018 ONSC 4943, at paras. 66-68, that where the family law proceedings for which costs are sought are completed prior to July 1, 2018, when the amendments to the Rules came into effect, the pre July 1, 2018 costs provisions of the Rules should be applied.

[10] The starting point in setting costs in family law matters is Rule 24(1):

24(1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.

[11] Rule 24(11) sets out the factors which must be considered in awarding costs:

(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 signatures of the order; (e) expenses properly paid or payable; and (f) any other relevant matter.

[12] An award of costs is a matter in the discretion of the court by virtue of s. 131(1) of the Courts of Justice Act, which provides:

Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in the proceeding are in the discretion of the court, and the court may determine by whom and to what extent costs shall be paid.

[13] In C.A.M. v. D.M., [2003] O.J. No. 3707 (C.A.) at para. 40, Rosenberg J. held that the Family Law Rules have circumscribed the broad discretion granted by s. 131(1) of the Courts of Justice Act, but that they have not, however, completely removed the court’s discretion. I note that Rule 24(11)(f) allows the court, in setting the amount of costs, to take into account “any other relevant matter.” Read in conjunction with s. 131(1) of the Courts of Justice Act, there remains a discretion to award costs that appear just in the circumstances of the case, while giving effect to the Rules.

[14] The Court of Appeal has made it clear that in assessing costs, the overriding principle is one of reasonableness, and that the failure to follow that principle can produce a result that is contrary to the fundamental objective of access to justice (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (Ont. C.A.), at p. 302).

[15] In Zesta Engineering Ltd. v. Cloutier, [2002] O.J. No. 4495 (Ont. C.A.), at para. 4, the Court of Appeal did not make a specific finding with respect to the amount of time spent or the rates charged by counsel, and stated:

In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.

[16] While Boucher and Zesta Engineering are not family law cases, I accept that the principles enunciated above are applicable to family law matters.

[17] Mr. Bernosky was successful at trial.

[18] The full recovery rate of $310.00 per hour shown for Mr. Smith is reasonable given his experience of 25 years, much of which has been in the area of family law.

[19] The full recovery rate of $160.00 per hour for his junior lawyer with two years experience is also reasonable. The full recovery rate of $160.00 per hour for Mr. Smith’s law clerk, even with 38 years experience, is somewhat high for the purposes of this assessment of costs.

[20] The number of hours billed by Mr. Smith and his junior lawyer, totalling 125.4, exceeds but is not greatly different than the 100.2 hours billed by Mr. Matthews and the other lawyers in Mr. Matthew’s firm. The difference in hours billed by Mr. Bernosky’s lawyers can, in part, be reasonably explained by the work that had to be done to lead evidence that Mr. Bernosky was not intentionally unemployed.

[21] Mr. Bernosky’s Bill of Costs contains significant entries with respect to the case conference and a trial management conference. Costs of those conferences were not reserved to the trial judge. Mr. Matthews states that he has removed from his Bill of Costs time spent on the case conference.

[22] Rule 24(1) (as it read prior to the July 1, 2018 amendments to the Rules) established as a general principle that costs were to be decided promptly after each step in a case, in relation to that step, unless reserved to a later stage in the case. If the costs of a conference or motion were not made at the end of the conference or motion, or were not reserved, the costs of those steps would generally not be considered in assessing costs after a trial.

[23] In the instant case, the costs of the case conference and of the trial management conference should not be taken into account in the assessment of the costs of the application.

[24] If the time expended by the solicitor for Mr. Bernosky on the case conference and trial management conference is removed from his Bill of Costs, the time spent by the lawyers for each party is not dissimilar.

[25] There was a motion returnable December 7, 2017. At the motion, Fitzpatrick J. determined that there should be a trial on the issue of whether income should be imputed to Mr. Bernosky. He expressly reserved the costs of the motion to the trial judge. Significant time was spent by the solicitor for Mr. Bernosky in preparing affidavits for the motion. At the trial management conference, Pierce J. made an endorsement that the evidence from the motion was to be used as direct evidence at trial. Although the parties testified at trial, the affidavits filed on the motion formed an important part of the evidence at trial.

[26] The matter was important to both parties. Ms. Schneidermeier had need of support. Mr. Bernosky had no ability to meet that need. Neither party acted unreasonably. In her greatly reduced financial circumstances and with Mr. Bernosky’s history of significant employment throughout the parties’ long term marriage prior to separation, it was not unreasonable for Ms. Schneidermeier to bring her application. Because of the termination of his job at the time of separation and his inability to obtain other employment, it was reasonable for Mr. Bernosky to defend the application.

[27] Mr. Bernosky’s answer and claim disputing spousal support also sought to set aside a separation agreement between the parties, dated October 12, 2016. The claim to set aside the separation agreement remains outstanding. At the trial management conference, Pierce J. recorded that claims other than spousal support and imputation of income were to be dealt with at another time.

[28] Ms. Schneidermeier submits that costs incurred with respect to this claim should be excluded from any determination of the costs of the trial of the issue of imputation of income. I agree with that submission, although it is difficult to determine from Mr. Bernosky’s Bill of Costs how much time was in fact spent on that issue.

[29] Mr. Bernosky served an offer to settle dated January 8, 2018, approximately four and a half months prior to trial. The offer to settle provided that Mr. Bernosky would pay Ms. Schneidermeier a lump sum of $5,000.00 and that the application and answer would be dismissed. The offer to settle remained open until the commencement of trial.

[30] Mr. Bernosky submits that the judgment at trial was more favourable to him than the terms of his offer to settle because the offer provided that both the application and answer were to be dismissed, whereas the judgment provided only for dismissal of Ms. Schneidermeier’s application for spousal support. The offer to settle also provided for dismissal without costs.

[31] Ms. Schneidermeier submits that the judgment at trial was not more favourable to Mr. Bernosky than the offer to settle because the judgment provided that the application for spousal support was dismissed without prejudice to Ms. Schneidermeier’s right to bring a claim for spousal support if there was to be a material change in circumstances. The judgment also required Mr. Bernosky to provide Ms. Schneidermeier with continued disclosure regarding his employment, employment search efforts and his income.

[32] In my view, the January 8, 2018 offer to settle differed enough from the judgment such that the consequences of rule 18(14), of costs to the date the offer was served and full recovery of costs after that date, do not apply. However, rule 18(16) provides that in exercising its discretion, the court may take into account an offer to settle even if subrule (14) does not apply. I find that the January 8, 2018 offer to settle should be taken into account.

[33] The amount of costs that Ms. Schneidermeier, as the unsuccessful party, could reasonably expect to pay for this trial is a factor in the exercise of my discretion. The Bill of Costs filed by her solicitor for comparison purposes, shows total fees, disbursements and HST of $26,488.05. This is with an hourly rate of $200.00 for Mr. Matthews, compared to Mr. Smith’s hourly rate, as a senior counsel, of $310.00. Ms. Schneidermeier should therefore have reasonably expected that the costs of this proceeding could be significant if she was unsuccessful at trial.

[34] Ms. Schneidermeier submits that the work done by the clerks of Mr. Smith’s law firm was excessive and that much of it was clerical or administrative in nature. From my review of Mr. Bernosky’s Bill of Costs, I cannot conclude that the law clerk’s work was excessive. On the face of the Bill of Costs, there is some administrative or clerical work recorded by law clerks, which should not be included in a costs award, but the amount of such work which is shown is relatively small.

[35] In Beaver v. Hill, 2018 ONCA 840, released October 22, 2018, the Court of Appeal stated at paras. 11 and 12:

[11] There is no provision in the Family Law Rules that provides for a general approach of “close to full recovery” costs. Rather, r. 24(12) sets out the appropriate considerations in fixing the quantum of costs.

[12] As the wording of the rule makes clear, proportionality and reasonableness are the touchstone considerations to be applied in fixing the amount of costs.

[36] This brings me to a significant issue in this case – the financial circumstances of both parties.

[37] Ms. Schneidermeier is 56 years of age. Mr. Bernosky is 59 years of age.

[38] In 1988, after the birth of the first of the parties’ three children, Ms. Schneidermeier left her employment of four years as a legal secretary and remained at home as a full-time homemaker. She was not employed as of the date of separation.

[39] Ms. Schneidermeier does not have a grade 12 diploma. In January 2018, approximately 16 months after separation, Ms. Schneidermeier enrolled in a nail technician course in Winnipeg. She completed the course and received a diploma in April 2018. The diploma allowed her to enter an apprenticeship program requiring approximately 900-1200 hours during which time she would be paid the minimum wage in Manitoba of approximately $11.25 to $11.40 per hour. At the time of trial, Ms. Schneidermeier had not enrolled in the apprenticeship program.

[40] The parties entered into a separation agreement dated October 12, 2016. The separation agreement dealt with the parties’ net family property. The separation agreement provided that spousal support remained to be determined. Ms. Schneidermeier received approximately $141,000.00 deposited into a Locked-In-Retirement Account (“LIRA”). Ms. Schneidermeier will receive further payments into her LIRA as part of the property settlement in the amount of $8,000.00 in 2018 and $64,000.00 in 2019.

[41] Since the date of separation, Ms. Schneidermeier has relied on the monies in her LIRA for support. As of May 7, 2018, she had approximately $79,480.00 remaining in her LIRA.

[42] Mr. Bernosky’s sole income as of trial was $821.00 per month from a Registered Retirement Income Fund (“RRIF”). As of April 25, 2018, Mr. Bernosky had approximately $86,800.00 in his RRIF.

[43] In Murray v. Murray, [2005] O.J. No. 5579 (C.A.), the Court of Appeal dealt with impecuniosity of the unsuccessful party as a factor in assessing costs in a family law case.

[44] The Court of Appeal found in that case that although the successful spouse had obtained an order which was more favourable than his offer to settle, neither rule 18(14) nor rule 24(1) required the court to make a costs award. The Court of Appeal concluded that a costs award would have a devastating effect on the unsuccessful spouse who was living in “impoverished circumstances” and would likely destroy whatever chance she may have to achieve financial self-sufficiency. The Court of Appeal held that taking into account the financial situation of both parties and, in particular, the complete lack of financial resources of the unsuccessful spouse, and the result of the appeal, each side should bear their own costs of the trial and the appeal.

[45] The financial circumstances of Ms. Schneidermeier are therefore a factor which I take into account. However, as counsel for Mr. Bernosky notes in his submissions, the parties’ financial circumstances are similar. On the one hand, indemnifying Mr. Bernosky will impose a financial burden on Ms. Schneidermeier. On the other hand, if Mr. Bernosky is not indemnified, he will face a financial burden.

[46] Mr. Bernosky submits that because Ms. Schneidermeier chose to litigate with effectively no compromise, she should bear the costs consequences.

[47] Ms. Schneidermeier served two Rule 24 offers in April 2018. The first offer would have required Mr. Bernosky to pay spousal support of $700.00 per month. The second offer required Mr. Bernosky to pay a lump sum of $70,000.00 in full satisfaction of all support claims. In view of these offers, I cannot accept Mr. Bernosky’s submission that Ms. Schneidermeier chose to litigate with no compromise. The offer of spousal support of $700.00 per month, in particular, was modest, albeit the judgment was not more favourable to her than her offer.

[48] I have concluded that because Mr. Bernosky was successful at trial there is no reason to depart from the presumption in rule 24(1) that he is entitled to costs, notwithstanding Ms. Schneidermeier’s financial circumstances. Mr. Bernosky’s financial circumstances are similar to Ms. Schneidermeier’s. Ms. Schneidermeier will be in receipt of approximately $82,000.00 during the next year as part of the parties’ property settlement. This will give her some resources from which to pay a costs award.

[49] However, I do take Ms. Schneidermeier’s restricted financial circumstances into account in assessing the quantum of costs which she should be required to pay. I also have taken into consideration the other factors that I have discussed above.

[50] I have reviewed Mr. Bernosky’s claim for disbursements. The only item which raised concern was photocopying charges of $677.30. There is no breakdown to show how that figure was calculated. However, the Bill of Costs from Ms. Schneidermeier shows photocopying charges of $678.00. I therefore conclude that there is no issue between the parties with the reasonableness of the claim for photocopying in the Bill of Costs of Mr. Bernosky.

[51] In my opinion, having regard to the factors discussed above, in the context of the particular facts of this case, it would be fair, and reasonable to award Mr. Bernosky costs of this application of $17,500.00 for fees, plus HST of $2,275.00, and disbursements of $2,015.65, plus HST of $262.03, for a total of $22,052.68.

“original signed by” The Honourable Justice D. C. Shaw

Released: November 26, 2018

COURT FILE NO.: FS-17-0100-00 DATE: 2018-11-26 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Karen Schneidermeier Applicant - and - Gary Bernosky Respondent DECISION ON COSTS Shaw J. Released: November 26, 2018 /sab