NEWMARKET COURT FILE NO.: FC-10-37022-02
DATE: 20181207
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Angela Elizabeth Van, Applicant
AND:
David Michael Palombi, Respondent
BEFORE: The Honourable Mr. Justice J.P.L. McDermot
COUNSEL: Rachel Radley and Gillian Tadman, for the Applicant
Respondent, Self-Represented
HEARD: By written submissions
COSTS ENDORSEMENT
[1] I heard a trial in this matter over six days during the May, 2018 sittings. The Respondent was allowed only limited participation in the trial as his pleadings were struck. I issued my decision on October 18, 2018. I have now received costs submissions from the Applicant arising from my decision. Because the Respondent’s pleadings were struck, no costs submissions were received from Mr. Palombi.
[2] I have been asked to quantify the Applicant’s costs of trial. As well, just prior to trial Mr. Palombi brought a motion before the Divisional Court for leave to bring an access motion. That motion was adjourned because trial was set for the May sittings. On April 3, 2018, the costs of that motion were reserved to me as the trial judge by Thorburn J. I am therefore considering the costs of both the adjourned motion and the trial.
[3] The Applicant’s counsel requests full recovery costs of both proceedings in the amount of $119,036.14. She bases this claim on offers to settle made by the Applicant as well as the Respondent’s unreasonable or bad faith conduct.
[4] I therefore need to consider the issue of costs from those perspectives, after which I must quantify the Respondent’s costs.
ANALYSIS
[5] There is no question that the Applicant was the successful party at trial. The Respondent’s motion for access before the Divisional Court was adjourned and was never adjudicated, a victory to the Applicant of sorts. The Applicant is therefore presumed to be entitled to an order for costs for both proceedings: see Rule 24(1) of the Family Law Rules.[^1] This leaves the only issue outstanding being the quantification of those costs.
[6] Modern costs rules are designed to foster four fundamental purposes (1) to partially indemnify successful litigants; (2) to encourage settlement, (3) to discourage and sanction inappropriate behaviour by litigants and; (4) to ensure that cases are dealt with justly under subrule 2 (2) of the Family Law Rules. See: Mattina v. Mattina, 2018 ONCA 867.
[7] The quantity of costs is governed by Rule 24(12) which reads as follows:
24(12) In setting the amount of costs, the court shall consider,
(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.
[8] The Applicant suggests that the intention of a costs award is to fully indemnify the winning party and she relies upon Biant v. Sagoo, 2001 28137 (ON SC), 2001 CarswellOnt 3315 (S.C.J.) as support for this proposition. In fact, this case was explained by the Court of Appeal in Beaver v. Hill, 2018 ONCA 840, which also confirmed that indemnification of a party is only one of the goals of a costs award. That case also confirms that the important principles in exercising discretion are reasonableness and proportionality.
[9] Costs are generally paid on a partial recovery basis. The major exceptions to that rule are situations where a party is guilty of unreasonable or bad faith behaviour, or has been less successful than an offer to settle served by a party under Rule 18(1).
Costs of Trial
[10] The Applicant’s Bill of Costs has itemized the costs of the Divisional Court as being $10,255 including HST.[^2] Disbursements are not itemized for the Divisional Court hearing. Backing the Divisional Court costs out, the costs claimed for trial in the Bill of Costs total $108,781.39 on a full recovery basis.
Offers to Settle
[11] The Applicant has made four offers to settle all of which were severable. The Applicant’s offers can be summarized in the chart below:
| Issue | Offer of July 6, 2015 | Offer of June 16, 2017 | Offer of November 10, 2017 | Offer of May 8, 2018 | Result at Trial |
|---|---|---|---|---|---|
| Custody | Sole Custody to Applicant with right to travel. | Sole Custody to Applicant with right to travel; Respondent has right to information. | Sole custody to Applicant with right to travel; Info to Respondent and communication through OFW. | Sole custody to Applicant with right to travel; Info to Respondent; non-deprecation and no dairy products. | Sole custody to Applicant with right to travel; Info to Respondent and no dairy products; non-deprecation and Applicant may enroll the children into extra-curricular activities. |
| Access | Supervised at a supervised access centre until Respondent’s therapist concludes he is no longer a danger to the children. | Supervised at a supervised access centre or by qualified professional; possibility of reunification therapy re Lily-Rose. | Supervised at a supervised access centre or by qualified professional. | Supervised at a supervised access centre or by qualified professional at the sole cost of the Respondent. | Access at the discretion of the Applicant subject to review if coherent plan for therapeutic access provided by children’s therapist at the Respondent’s expense. |
| Child Support | Not addressed. | $966 per month commencing July 1, 2017 based on Respondent’s annual income of $65,000. | $963 per month commencing January 1, 2017 based on Respondent’s annual income of $64,817. | $1,111 per month commencing January 1, 2018 based upon the Respondent’s income of $73,125. | $1,203 per month commencing May 1, 2018 based upon a finding that the Respondent’s annual income is $79,510. |
| Retroactive Base Child Support | Not addressed. | Not addressed. | Not addressed. | Formula provided for setting of previous years for payment of child support; arrears of base child support plus s. 7 expenses set at $6,061.86. | Formula suggested by Applicant largely followed: base child support arrears set at $7,331. |
| Section 7 Expenses | Not addressed. | Commencing July 1, 2017, the Respondent to pay 50% of children’s special and extraordinary expenses. | Commencing January 1, 2017, the Respondent to pay 50% of children’s special and extraordinary expenses including medical, dental, therapy, orthodontics, summer camp, swimming and karate. | Commencing June 1, 2013, the Respondent to pay 50% of children’s special and extraordinary expenses including medical, dental, therapy, orthodontics, summer camp, swimming and karate. | Commencing May 1, 2018, the Respondent to pay 50% of children’s special and extraordinary expenses including medical, dental, therapy, orthodontics, summer camp, swimming and karate. |
| Section 7 arrears | Not addressed. | Not addressed. | Not addressed. | Combined with arrears of base child support as above. | Set at $1,306 as of May 31, 2018. |
| Vexatious Litigant | Not addressed. | Not addressed. | Not addressed. | Not addressed. | Claim to declare Respondent a vexatious litigant dismissed; ordered that the Respondent cannot commence proceedings (other than access review) without payment of costs. |
| Costs | $2,500 payable if accepted before July 13, 2015; $5,000 if accepted after. | No costs other than as already ordered if accepted prior to June 26, 2017; full indemnity costs if accepted after. | $5,000 for the portions of offer accepted if the offer is accepted before November 13, 2017; $10,000 for the parts accepted if accepted after. | $15,000 for the parts accepted if accepted prior to May 10, 2018; $25,000 for the parts accepted if accepted after. | As in this costs endorsement. |
| Offer Severable? | No | No | No | Yes |
[12] The Respondent also served an offer to settle the proceedings on October 6, 2015. He offered the Applicant sole custody of the children; however, the access was to be unsupervised from Wednesday to Monday every second week. Mr. Palombi would have no obligation to pay s. 7 expenses although Ms. Van would have the right to place the children in any extracurricular activities she thought fit. Mr. Palombi would pay base child support according to his income; the support amount was unquantified. The offer was not severable. There were to be no arrears of child support.
[13] There was a mid-trial conference and the draft Minutes of Settlement prepared by the Applicant were attached to the costs submissions. The Minutes make it apparent that the Applicant was willing to agree to sole custody and they provided a pathway to therapeutic access not made available at trial, as there were few particulars as to what therapeutic access would look like. What was offered was close to the result at trial, other than support which was not addressed by the Minutes. Costs were a comparative bargain, at $50,000. Settlement proved to be impossible and the trial resumed.
[14] It appears from all of the offers to settle that, by 2015, the parties were all in agreement that the Applicant would have sole custody of the children. That was a major issue argued at trial, with the Respondent continuing to argue in favour of shared custody even though he was not exercising any access by the time of trial.
[15] The other major issue addressed in these proceedings was the Respondent’s access to the children. As the matter progressed toward trial and as the Respondent’s relationship with the children deteriorated, the Applicant’s position on the record hardened, and she eventually ended up requesting therapeutic access in accordance with the assessor’s recommendations. Notwithstanding the Applicant’s position, her offers continued to allow for supervised access to the children at a supervised access centre which was much more generous than the result at trial. All four of the Applicant’s offers, as well as the draft minutes discussed during trial, were better than the Respondent’s result at trial. The Respondent’s offer on the other hand, considering his conduct and the assessor’s recommendations, was unrealistic concerning access.
[16] The Applicant’s first offer did not address child support, or offer a dismissal of the Applicant’s claim for child support. By the time that initial offer had been made, Rogers J. had already increased the child support by her interim order of March 12, 2014. I therefore have to assume that this was not a comprehensive offer, as it failed to address either base child support or s. 7 expenses and the child support proceedings would have continued even were the offer accepted.
[17] The first offer therefore falls within the class of offers under Rule 18(16), which allows a court to take into account an offer even if it does not comply with Rule 18(14). This offer is not an offer within the meaning of Rule 18(14) as the result at trial included retroactive and ongoing child support which was not addressed by that offer.
[18] The remaining offers are all more favourable than the result at trial in every way and all comply with Rule 18(14). Had Mr. Palombi accepted any of these offers, his situation would be substantially better with both the children and in respect of the support payable had he not proceeded with the trial.
[19] I note as well that the last two offers made by the Applicant were severable, a factor to be considered in the assessment of costs: see Sepiashvili v. Sepiashvili, 2001 25708 (ON SC), 2001 CarswellOnt 3459 (S.C.J.).
[20] I find that all of the offers made by the Applicant were made in good faith, and with the genuine intention to compromise in respect of the issues to be raised at trial: see Beaver v. Hill, supra at para. 15 and 16. Considering the assessment reports filed in this matter, and the Respondent’s lengthy periods of time where he elected not to exercise access without good explanation, the offers were reasonable in their terms and foresaw a conclusion that would have been, at the very least, reasonably expected in the end result.
[21] Therefore, under Rule 18(14), the Applicant is entitled to her costs on a full recovery basis from the date of her second offer, which was made on June 16, 2017. I also specifically take into account the first offer in assessing costs even though it does not address child support: the child support issues were really dealt with by written submissions as the Respondent’s rights to reply in this matter were reduced to a cross-examination of the assessor by the Divisional Court.
[22] Prior to assessing the quantum of costs, the court must next address the effect of the Respondent’s unreasonable or bad faith conduct.
Unreasonable Conduct
[23] The Applicant suggests that Mr. Palombi has conducted himself in an unreasonable fashion in this litigation and requests full recovery costs as a result. Although the Applicant also suggests that Mr. Palombi is guilty of bad faith conduct, she does not appear to press this point.[^3]
[24] Rule 24(8) states that the court is obliged to order full indemnity costs payable forthwith if a party has acted in “bad faith.” Unreasonable conduct is different from bad faith behaviour. Bad faith behaviour requires a fairly high threshold to achieve and because of this a finding of bad faith is rarely made: see S.(C.) v. S.(C.), 2007 20279 (ON SC), [2007] O.J. No. 2164 (S.C.J.) and Piskor v. Piskor, 2004 5023 (ON SC), [2004] O.J. No. 796 (S.C.J.).
[25] Similarly to the present case, the husband in Piskor had failed to provide disclosure or pay support. Blishen J. of this court found that the husband was guilty of bad faith conduct partly because of this behaviour; however, [at para. 8] she also relied upon Hendry v. Martins, [2001] O.J. No. 1098 (S.C.J.), where Campbell J. adopted the definition of “bad faith” from Black’s Law Dictionary, 6th ed. (1990):
Bad faith is not simply bad judgment or negligence but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity ... it contemplates a state of mind affirmatively operating with furtive design or ill will.
[26] Furtive design or ill will necessary for a finding of bad faith in Piskor is lacking in the present case. Although there is ample evidence of unreasonable conduct, Mr. Palombi has not shown to be consciously malicious toward the Applicant in this proceeding. The submissions of the Applicant are not sufficiently focused to allow this type of finding in this case.
[27] On the other hand, there is little doubt that Mr. Palombi is guilty of unreasonable conduct during these proceedings. The unreasonableness of a party’s conduct is to be considered in light of Rule 24(5) which reads as follows:
24(5) 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.
[28] Mr. Palombi’s pleadings were struck as a result of his failure to pay costs and section 7 expenses for the children’s therapy. The extent of his misconduct is also obviated by the fact that Mr. Palombi’s pleadings were struck in these proceedings for custody and access, something not usually done where child related issues are before the court.
[29] The numerous cost awards in this proceeding are also evidence of Mr. Palombi’s unreasonable litigation conduct. He was unsuccessful in most of the motions brought in the course of the litigation and ended up owing more than $30,000 in costs to Ms. Van, most of which, if not all, remains unpaid.
[30] Mr. Palombi made only one offer to settle in 2015. That offer was unreasonable, as it failed to address his increases in income when assessing support, and demanded that Mr. Palombi receive the child tax credit for one child even though custody was not shared and even though that was not necessarily up to the parties. Mr. Palombi also failed to consider the Applicant’s offers to settle, which proved to be reasonable in light of the result at trial.
[31] It is also clear that Mr. Palombi did not properly disclose his income for the purposes of trial. He provided an updated financial statement only on the eve of trial along with his more recent tax returns. He never proved his 2014 income. His financial disclosure was lacking and, because of this, the court was left with the job of calculating guideline income for Mr. Palombi for the past years.
[32] More serious, however, was Mr. Palombi’s treatment of his children. He said terrible things about the children’s mother to them and was inconsistent in his exercise of access. His inability to see the harm he was doing to his children was one of the major issues at the trial and for the assessor, Mr. Musselman. His unreasonable behaviour and inability to control that behaviour resulted in a second assessment and, in my view, the trial. He maintained an unreasonable position at trial and throughout.
[33] I find that Mr. Palombi is guilty of unreasonable litigation conduct and unreasonable conduct concerning his children. I take this into account in setting the costs amount for trial.
Quantification of Trial Costs
[34] Notwithstanding Mr. Palombi’s unreasonable conduct, the relief sought by the Applicant at trial was ambitious. She sought to severely restrict Mr. Palombi’s access to the children because she truly believed that this was in their best interests, considering the harm that she felt that Mr. Palombi was dealing to the children during his time with them. But because of the principle of maximization of conduct for parents and their children,[^4] Ms. Van had a heavy onus to meet: she had to prove that it was in the best interests of the children not to have what most children are entitled to: meaningful and extensive contact with each of their parents.
[35] The Applicant requests time and disbursements of over $108,000 for the trial. More than 290 hours of lawyers’ or paralegal’s time is reflected in the Bill of Costs. The hourly rates are reasonable considering years of experience. The time entries on the Bill of Costs appear to be reasonably related to trial or the drafting of the initial pleadings; I note that Ms. Tadman’s attendance at trial is not included in the Bill of Costs which was reasonable concerning given that evidence-in-chief was provided by affidavit, and the only witness at trial was Mr. Musselman.
[36] Considering the heavy onus that the Applicant had to meet at trial, and considering the fact that this was a six-day trial, the Bill of Costs and the claim for costs is not unreasonable. Under Rule 24(12)(a)(iv), I am to consider the “reasonableness and proportionality” of the costs considering the legal fees charged and the hourly rates of the lawyers. Because of the issues resultant from the unreasonable behaviour of the Respondent with the children, the hours spent by counsel are both reasonable and proportionate to the issues before the court, which include the safety and well-being of the children who were in issue. As well, the Applicant attempted to minimize costs by presenting most of the in-chief evidence by way of affidavits of the various witnesses in this matter: the only viva voce evidence came from the assessor.
[37] More than $10,000 in disbursements are requested but the vast majority of these disbursements are for the attendance of the assessor at trial. This again was necessary as the Divisional Court had given both parties the right to cross-examine the assessor, whose evidence was crucial to the result.
[38] In light of the offers to settle and Mr. Palombi’s extremely unreasonable conduct throughout this litigation, Ms. Van shall have her costs of the trial assessed on a full recovery basis as requested. There shall be an order for the costs of trial in the amount of $108,781.39.
Costs of Divisional Court
[39] The motion before the Divisional Court was a motion brought by the Respondent in April, 2018 for leave to bring an access motion. The motion was brought, presumably, because the Respondent’s pleadings had been struck and the Respondent therefore required leave to move for an access order.
[40] The motion was adjourned because it would have taken longer to schedule the motion for leave than the anticipated time for trial in May, 2018. Costs were left to the trial judge.
[41] As the motion was adjourned without resolution, this is a victory to the Applicant. And her lawyers had to prepare for the motion notwithstanding the adjournment. The motion was ill-founded on the eve of trial. The Applicant shall have her costs of the motion.
[42] The Applicant offered to settle the motion by way of a dismissal of the Respondent’s motion “in its entirety”. That did not occur as the motion was not heard and that motion now will now not be heard as the trial is complete.
[43] The Applicant claims costs of the motion in the amount of $10,255 inclusive of HST. There was no breakdown of the disbursements of the motion.
[44] It is difficult to determine from the materials the complexity of the issues or what was involved in arguing the motion. All that I have been provided with is a copy of Mr. Palombi’s motion and the time spent on the motion. The motion was never argued.
[45] There is no basis for full recovery costs for the motion. Costs will therefore be awarded to the Applicant for the motion on a partial recovery basis in the amount of $5,500 inclusive of HST.
DISPOSITION
[46] There shall therefore be an award of costs in the amount of $114,281.39 payable by the Respondent to the Applicant.
[47] The Applicant requests costs be enforceable as support. She says that a principle issue before the court was retroactive and ongoing child support and that such a remedy is therefore warranted.
[48] Support was not an issue before the Divisional Court and therefore cannot be collectable as support.
[49] Child support and retroactive child support was a principle issue in this proceeding, if not at the trial itself. Accordingly, costs may be ordered to be enforceable as support: see Clark v. Clark, 2014 ONCA 175.
[50] The Respondent has an abysmal record of payment of costs. The non-payment of child support was a reason for the striking of the Respondent’s pleadings. I ordered that the Respondent could not bring further proceedings until his costs are paid as well as the costs that I am ordering in this endorsement. Notwithstanding these orders, and in particular the striking of the Respondent’s pleadings, he still has not paid his pre-trial costs.
[51] Costs of the trial in the amount of $108,781.39 shall therefore be enforceable as support by the Director, FRO.
McDermot J.
Date: December 7, 2018
[^1]: O. Reg. 114/99
[^2]: Time spent by law clerk ($1,625) + time spent by Rachel Radley ($4,350) + time spent by Christopher Yu ($3,100) + HST of $1,180 = $10,255
[^3]: The Applicant states, at para. 33 of her costs submissions that “there are costs consequences for bad faith failure to disclose” but only mentions Rule 24(8) at one other point in the submissions.
[^4]: Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), s. 16(10)