COURT FILE NO.: FS-13-39062
DATE: 20190523
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Galina Psavka
Applicant
– and –
Robert Kroll
Respondent
Appearing on her own Behalf
Appearing on his own Behalf
HEARD: In Writing
C. Gilmore, J.
[1] This trial was heard in January and February 2019 over the course of 14 days. The judgment was released on March 29, 2019. The parties were invited to provide written submissions on costs with specific dates given for the receipt of those written submissions.
[2] The judgment specified that no extensions would be given for the costs submissions. This was because the parties provided written argument on certain points after the conclusion of the trial. The applicant sought two extensions for her written submissions thereby considerably delaying the release of the judgment.
[3] Notwithstanding the very specific timeline for providing written submissions and the explicit direction that no extensions would be permitted, the applicant sought an extension. The respondent opposed any extension based on the instructions in my judgment and the fact that the applicant had been granted two extensions for her written argument which he had opposed. The respondent pointed out that despite the extensions, the applicant’s written argument contained many references which were either irrelevant or which the court could not rely upon because they contained new evidence. The extension requested by the applicant was therefore denied.
[4] The applicant submitted a one page cost submission at 8:29 p.m. on the date her cost submissions were due (April 26, 2019). The submissions contained no reference to any legal fees expended by the applicant although she gave evidence at trial of having spent over $200,000 on legal fees for counsel she had retained at various points in the litigation prior to trial. Instead, the applicant was critical of the trial judgment and advised that she had received approval from Legal Aid to hire counsel. Neither of these factors are ones which the court should consider in dealing with costs.
[5] The court cannot wait any longer in this matter. The applicant reiterated in her costs submissions that she has always been willing to settle and never wanted the matter to go to trial. However, her positions at trial were found to be unreasonable in every area including access, child support, spousal support and section 7 expenses. It is not surprising, therefore, that the matter could not settle. The respondent has the right to have his claim for costs dealt with expeditiously.
THE PARTIES’ POSITIONS ON COSTS
The Respondent
Offers To Settle
[6] The respondent was entirely successful at trial on the major issues. His claims for damages for non-compliance with the access order, a restraining order and an equalization of household contents were dismissed. Overall, these were minor claims in terms of the amount of time spent at trial, and with respect to the overall result.
[7] The respondent served many Offers to Settle over the course of this litigation. The most relevant is the one dated January 3, 2019, just prior to trial. That offer proposed to settle on the following terms:
a. Joint custody of M.K.
b. Alternate weekend access to M.K. or as the parties agreed.
c. Child support for M.K. as of January 1, 2019 of $1,506 per month based on the respondent’s income of $250,000 and the applicant’s income of $100,000.
d. No child support payable for the oldest child, R.K., who is attending university.
e. The applicant to pay the respondent $50,000 in s.7 expenses for the period of January 2015 to December 31, 2018.
f. Commencing January 1, 2019, the parties to pay their proportionate share of the children’s s.7 expenses based on the respondent’s income of $250,000 and the applicant’s income of $100,000.
g. The respondent to pay spousal support to the applicant in the amount of $1,794 per month commencing January 1, 2019 based on the respondent’s income of $250,000 and the applicant’s income of $100,000.
h. The applicant to pay the respondent the sum of $61,500 by way of a reimbursement for an overpayment of child and spousal support. This amount to be set off against the respondent’s ongoing support obligations.
i. The offer was open until the commencement of trial. If accepted after January 14, 2019 the applicant to pay the respondent’s costs as assessed by the court.
[8] In comparison to his Offer to Settle, the respondent had success as follows:
a. Robert’s income for support purposes was determined to be $184,541 for the purposes of ongoing child support. This is far less than the $250,000 which the respondent offered to impute to himself in his Offer.
b. The respondent was required to pay ongoing spousal support of $1,470 per month until July 2020. He offered to pay $1,794 per month with no termination date.
c. The respondent was required to pay ongoing child support of $1,548 commencing January 1, 2019. He offered to pay $1,506 per month.
d. He offered to receive a credit of $50,000 in s.7 expenses from the applicant. He was found to have a credit of $8,908.
e. He offered to receive a credit of $61,500 for the overpayment of child and spousal support. He was found to have a credit of $72,651.
f. While the respondent was not awarded joint custody, he was given significant decision making authority and the ability to travel with M.K. without the applicant’s consent. Further, he was given more than alternate weekend access. He was awarded, in addition to alternate weekend access, specific long weekends (Easter and Thanksgiving), each March Break, Yom Kippur, and alternate weeks during the summer.
g. The respondent was not required to pay child support for R.K. but he was required to continue paying for her rent and incidental expenses while at university. He was also required to pay for all extra-curricular activities in which he enrolled M.K., without any contribution from the applicant.
[9] The respondent also served an Offer to Settle dated November 29, 2017. This was served in anticipation of the January 2018 trial. That trial was adjourned to January 2019. However, the Offer was similar to his January 3, 2019 Offer except that he offered to be paid a credit of $20,000 in s.7 expenses, presumably because the Offer only covered the period of January 2015 to December 31, 2017.
[10] In August 2016, the respondent served an Offer to Settle on all issues. He offered to impute income to himself of $225,000 and to the applicant of $130,000. He offered to pay child support for M.K. of $1,818 per month plus an additional $1,050 for the four summer months in which R.K. resided with the applicant.
[11] He also offered to pay spousal support of $1,350 per month for a period of five years terminating on August 31, 2021. He offered to contribute $20,000 per year for R.K.’s university expenses and $7,500 per year for M.K.’s camp and hockey. The applicant would contribute $850 per month to the respondent for s.7 expenses.
[12] In December 2016 the respondent offered to settle the issue of child support, spousal support and s.7 expenses for 2015 and 2016 by imputing an income to himself of $250,000 and agreeing to pay child support of $3,152 per month and spousal support of $3,478 per month for 2015. In 2016 he offered to pay child support of $3,152 per month and spousal support of $1,187 per month. After R.K. left for university in September 2016 he offered to pay child support of $2003 per month and spousal support of $1,428 per month.
[13] It is also clear from the documents filed that the parties had made efforts to settle through Ms. Ennis, which although not finalized, were also more favourable to the applicant than the trial result.
[14] In the final result the respondent did far better than his Offers to Settle, both current and historical. There is also nothing in either party’s costs submissions to indicate that the applicant ever provided a formal Offer to Settle.
Previous Legal Fees
[15] The respondent was represented by counsel at various times during the litigation but not at trial. He also incurred expert’s fees.
[16] The total legal fees incurred by the respondent on a full recovery basis was $226,349.35. These fees represented the services of seven different lawyers over a period of approximately five years. It is clear from the time dockets filed that the respondent received advice and guidance from Mr. Ludmer throughout the trial and after the judgment was rendered.
[17] The Bill of Costs provided is appropriately reflective of the trial plus the six different proceedings for which costs were reserved to the trial judge.
[18] The total expert’s fees were $13,452.40. In addition, the respondent seeks reimbursement of $56,000 for his own time at $150 per hour and that of his assistant, Ms. Zusman at $50 per hour.
[19] The total amount sought by the respondent including legal fees, his own fees and those of his assistant are $295,801.75.
Entitlement to Costs
[20] The respondent seeks to recover costs on a near full recovery scale based on the following considerations under rules 18 and 24 of the Family Law Rules:
a. The respondent made significant and repeated attempts to settle.
b. The respondent did as well as or significantly better than his Offers.
c. The court rejected the applicant’s position with respect to the respondent’s income, support and s.7 arrears owed to her.
d. The applicant did not serve a formal Offer to Settle.
e. The respondent acted in bad faith with respect to the children and behaved unreasonably with respect to the financial issues.
f. The respondent was found to have substantially overpaid child and spousal support. This result was, in part, attributable to the applicant’s refusal to adjust child support when the parties’ child, R.K., left for university.
g. The court commented on the applicant’s demeanour during the trial which made the process lengthier and more difficult.
h. The applicant was found to be deliberately non-compliant with the access order.
i. The respondent should be entitled to be compensated for his time and that of his assistant. This recovery would be far less than if the respondent had had legal representation.
The Applicant
[21] It is difficult to properly ascertain the applicant’s position on costs as her submissions were brief and did not focus on the relevant considerations under the Family Law Rules.
[22] In brief, the applicant does not agree to pay any costs. She bases this on her complaint that the respondent’s lifestyle and assets were not properly considered by the court at trial and that the respondent has not paid support for April 2019. The applicant complains that she has always been ready to settle out of court but provides no evidence of this position.
[23] Although invited to do so, the applicant did not provide any Bill of Costs for the significant legal fees she incurred prior to trial.
ANALYSIS AND CONSIDERATIONS UNDER RULES 18 AND 24
Rule 18 Considerations
[24] The respondent had a valid outstanding Offer at the commencement of trial. He also had other Offers which I infer were replaced by the January 3, 2019 Offer. In any event, none of the Offers were accepted by the applicant.
[25] The January 3, 2019 Offer complies with Rule 18 as it was served at least seven days prior to the trial, was not withdrawn, and was signed by the respondent. The Offer sets out that if it was accepted prior to January 14, 2019 neither party would pay costs to the other. The Offer was not time limited and therefore did not expire prior to trial.
[26] It is clear from the comparison of the January 3, 2019 Offer and the trial judgment that the respondent overall did much better than his Offer. He offered to pay more spousal support for an unlimited time, he offered to pay approximately the same amount of child support and he was awarded $11,000 more than the credit he offered to receive for the overpayment of child and spousal support.
[27] The respondent did not do as favourably on the issues of the credit for s.7 expenses and on the issues of custody and access. However, it bears repeating that the respondent did receive a credit for s.7 expenses and did receive a form of parallel parenting and access that was far more expansive than the consent order from 2014. It is also of note that the trial result was more favourable to the respondent with respect to all of his historical Offers to Settle as well.
[28] The respondent has requested that a close to full recovery scale of costs be considered given the respondent’s success at trial in comparison to his Offer. I agree. The concurrent issue that must be dealt with is proportionality, given the large amount being sought by the respondent.
Rule 24 Considerations
[29] Rule 24 stipulates that a successful party has a presumed entitlement to costs. The presumption certainly applies in this case with a few questions to be determined:
a. Should the respondent be compensated for his own trial preparation and time?
b. Should the respondent’s assistant be compensated for her time spent on the trial?
c. How should proportionality affect the overall cost award given the parties’ respective financial circumstances?
d. Should any portion of the costs be offset against future spousal or child support obligations?
[30] Rule 24 also mandates that this court examine whether or not a party has behaved reasonably including whether they made an Offer to Settle, and if they made an Offer, the reasonableness of that Offer.
[31] The applicant did not make an Offer to Settle. If she did, it was never presented to the court. Given the length of the trial and the amounts at stake, it was unreasonable for the applicant not to have made a formal Offer to Settle prior to trial.
[32] In terms of other unreasonable behaviour, I note the following on the part of the applicant:
a. The applicant’s behaviour at trial was appalling. This was commented upon by the court both during the trial and in the judgment. The applicant was warned many times about her histrionics, rants and verbal attacks on witnesses. On a few occasions the applicant apologized to the court but would then immediately revert to her unacceptable behaviour.
b. The applicant insisted on relying on a document (Exhibit 6, Tab 5) that was hearsay and unproven. Further, she refused to identify or call as a witness the person who had retrieved or authored the document. She claimed that the document proved that the respondent was lying about his income and asked that the court rely on that exhibit as proof of the respondent’s income. The evidence of the respondent and the witnesses he called from the ReMax organization was clear that the document was generated for awards purposes and could not be relied upon as proof of the respondent’s income. Despite this very clear evidence, the applicant insisted on relying on a hearsay document for which she refused to provide any foundation.
c. The applicant was unwavering in her insistence that the respondent’s income for child support purposes should be $429,000. This position was taken in the face of Ms. Prussky’s expert evidence that his income for support purposes was $219,000 which included add backs for personal expenses and his properly deducted business expenses. The applicant insisted that the respondent should only be allowed a 25% reduction in his income for expenses despite the fact that she took far more than that when reporting her own commission income, and when the ReMax executives’ evidence was that it was not possible to earn an income as a real estate agent without incurring expenses of at least 40%. The applicant’s position on the respondent’s income for support purposes was completely unreasonable and not supported by any credible or expert evidence.
d. The applicant forced a pre-trial motion on whether the parties had settled the issues of support and equalization as of December 31, 2014. I found that such a settlement had been reached. This was not a difficult conclusion to make given that the applicant’s own counsel at the time confirmed the settlement and the applicant swore an affidavit at that time also confirming the settlement. Again, the applicant was unreasonable in taking this position and incurred unnecessary costs and court time.
e. After the support motion before Harvison Young, J. (as she then was), the applicant refused to adjust child support after M.K. left for university in September 2016, even when such a recommendation was made by the motions judge. The applicant appeared to be under the impression that she was entitled to receive support for two children when there were not two children living with her. This was an untenable position in the circumstances and was the main reason for the large support credit owing to the respondent.
f. The applicant was candid about her breaches of the 2014 access order. She was clear that the children (no matter how young they were) could decide if they wanted to see their father. Further, she imposed restrictions on access which were unreasonable and unsupportable in law. The applicant did not appear to care. Court orders apparently do not apply to her.
g. While the applicant had prepared her cross-examination outlines in advance, much of her cross-examination was irrelevant, petty and bordering on sarcastic.
h. The applicant relied on a financial statement that was two years old. She conceded she had not included certain debts in her financial statement because she simply did not want the respondent to find out about them. The court questioned whether any of the applicant’s evidence on her own financial matters could be relied upon as a result.
[33] In reviewing the considerations under Rule 24 (12) and specifically with respect to each party’s behaviour, the applicant’s behaviour at trial has been commented upon multiple times both in this ruling and in the trial judgment. Her behaviour in terms of her conduct at the trial, her positions taken at trial and her approach to settlement was unreasonable. It caused unnecessary delay and costs.
[34] The respondent was courteous to the court and did his best to have his documents organized. The witnesses he called were knowledgeable and helpful to the court. The respondent remained remarkably calm throughout the trial despite being goaded and subjected to personal attacks by the applicant.
[35] As for expert witness fees, the fees for Ms. Prussky should be recoverable by the respondent. Ms. Prussky’s evidence was extremely helpful to the court as it provided a reliable framework for determining the respondent’s income in 2015 and forward. Ms. Prussky’s opinions allowed the court to fairly determine how personal expenses should be added back to the respondent’s income and the reasonable deduction of business expenses.
[36] With respect to legal fees, the respondent has had legal representation at various times since 2014. A review of the dockets makes it clear that much of the time spent by counsel over the years related to the respondent attempting to enforce an access order with which the applicant refused to comply. The other area in which much time was spent related to the respondent attempting to adjust child support to reflect the reality of M.K. no longer living with the applicant and the applicant refusing to make such an adjustment. The trial result reflects the court’s refusal to adopt the applicant’s unreasonable position on both issues. The respondent should have his reasonable and proportional share of past legal fees.
[37] With respect to “other expenses paid or payable” under s.24 (12) (vi) the court must examine the respondent’s request for compensation for his own time and that of his assistant, Ms. Zusman. Specifically, the respondent claims compensation for 280 hours of his own time for trial preparation and attendance at $150 per hour and 280 hours of Ms. Zusman’s time at $50 per hour.
[38] In Witter v. Gong [2016] O.J. No.6333 (S.C.J.) at paras. 8-12, E.B. Murray, J. reviewed the case law since Fong v. Chan and noted in summary:
Indemnification of a successful litigant is not the only objective of the costs rules which are also designed to encourage settlement and to discourage and sanction inappropriate behaviour by litigants;
Courts have awarded costs to successful self-represented litigants who have not foregone remunerative activity to do what would otherwise be lawyer’s work on the case;
Without the option of awarding meaningful costs to self-represented litigants, the court’s ability to encourage settlements and discourage inappropriate behaviour will be greatly diminished;
To require proof of lost income would disqualify litigants who are homemakers, retirees, students, unemployed, unemployable, and disabled and deprive courts of a tool required re: administration of justice;
There is a wide variation in the approach taken by courts to quantify costs that are payable to the self-represented litigant;
Most courts base the award at least in part on the time spent doing legal work. But self-represented litigants are not in the practice of keeping dockets as to what is legal work done as compared to the time that was spent devoted to the case as if they were represented by counsel;
The rate varies widely, from $20.00 per hour to $150.00 per hour, less time the party would still have spent on the case if represented;
Some courts have used the lawyer’s rates for the unsuccessful party if represented or the actual legal fees that party has incurred as a measuring stick to determine compensation to the self-represented party;
Some courts have used a rule of thumb allowing so many hours of preparation time and so many hours of trial time;
Courts have considered the quality of the work performed by the self-represented litigant as a factor in a costs decision;
Consideration must be given to the appropriate level of indemnification, assessed by reference to degree of success and reasonableness of each party’s litigation behaviour; and
The amount of costs awarded must be reasonable, proportional and within the losing party’s expectation.
[39] In reviewing the principles cited above, I am satisfied that they apply to this case. The respondent was well-prepared. It was very clear that he had spent time and effort preparing his outlines for questioning, his exhibit books and ensuring his witnesses were prepared and properly marshalled. He attended court each day on time and was suitably dressed. At all times he attempted to be efficient and not waste the court’s time.
[40] The respondent is self-employed. Each day he was in the courtroom was a day that he was not earning money as a real estate agent. Of course, it is true that the respondent would have had to attend court each day even if he had counsel. However, the proposition of entitlement to compensation is not diminished by that fact. It may however, affect the hourly rate to which the respondent is entitled and the amount of hours to be calculated.
[41] The respondent seeks compensation for 280 hours of work. In McMurter v. McMurter, 2017 ONSC 725, the successful self-represented wife sought costs for her time after a 15 day Motion to Change in which the husband was unsuccessful in terminating spousal support. The court in McMurter relied on Izyuk v. Bilousov, [2011] O.J. No. 5815 (S.C.J.) in concluding that $100 per hour for a well-organized self-represented litigant was a reasonable hourly rate. In McMurter, the wife was awarded costs of $31,300 being 313 hours at $100 per hour. She was also awarded all of her disbursements. In the Izyuk case, the husband was awarded $20,000 for 200 hours of work at $100 per hour for a 17 day trial. That was reduced to $10,000 given that the wife was in receipt of Ontario Works.
[42] I find that the respondent is therefore entitled to compensation for work which have ordinarily been done by counsel. The respondent was well prepared and organized. 280 hours is therefore not unreasonable but does not reflect the fact that the respondent would have had to attend court in any event. I find that 200 hours of work is therefore reasonable. In terms of an hourly rate, $150 would be at the high end. A rate of $100 per hour would be reasonable and proportional in the circumstances. Therefore, the respondent should receive $20,000 plus HST for his own trial time and preparation.
[43] I now turn to whether the respondent should be compensated for Ms. Zusman’s time at $50 per hour for 280 hours. I am aware that Ms. Zusman was integrally involved in the preparation of much of the disclosure and exhibits in this trial including hours of photocopying and organizing. It is also true that the respondent was obliged to pay Ms. Zusman even when he was not specifically generating real estate related work for her.
[44] Ms. Zusman’s evidence at trial was that she is paid $52,000 per year. If she works 40 hours per week at that salary, that works out to approximately $27 per hour. It is therefore not reasonable to charge $50 per hour for her services as compensation for costs.
[45] I accept that some of the work that Ms. Zusman did to assist with trial preparation would have otherwise been done by the respondent (at a higher rate) or the respondent would have had to pay someone else to do it. It is reasonable, therefore, to award the respondent a small amount of compensation for these services as he was obliged to pay Ms. Zusman whether she was doing trial preparation or other work as he directed. The respondent should receive compensation for Ms. Zusman’s services for 50 hours of work at $20 per hour of $1,000.
[46] In Serra v. Serra, 2009 ONCA 395, the Ontario Court of Appeal reiterated the purposes of a costs orders as 1) to indemnify successful litigants, 2) to encourage settlement, 3) to sanction inappropriate behaviour and 4) to control the duration and expense of litigation. Once those considerations have been made, the court must effectively step back and objectively view those considerations through the lens of proportionality as per the considerations in Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), 2004 CarswellOnt 2521 (ONCA) at para 24.
[47] In this case, the applicant presents as impecunious. That should not prevent the court from awarding costs. Litigants cannot expect that after acting unreasonably, prolonging the court process and refusing to present reasonable settlement options, that there would be no costs consequences.
[48] The respondent seeks a credit for future child and spousal support payments against any costs award. It would not be appropriate to set off child support against the costs award. Child support is for the benefit of M.K. M.K. remains a dependent and in need of support.
[49] However, a set off of any future spousal support obligation and a compensatory award of spousal support would be in order. The respondent’s net monthly spousal support obligation as of January 1, 2018 is $765 per month (see Appendix F to the trial judgment). The respondent will have already paid this support from January to May 2019. Support is payable until July 1, 2020. Therefore, the applicant shall receive a credit of $9,945 towards the costs award representing net spousal support payments from June 1, 2019 to July 1, 2020. The respondent’s spousal support obligation shall cease as of June 1, 2019.
[50] In the trial judgment, there was discussion of a possible compensatory award of support. Given the length of the marriage a compensatory award may be reasonable. Given the likely inability of the applicant to pay any award of costs, the costs award should be reduced by a further $50,000 by way of a credit to the respondent for a lump sum of compensatory spousal support.
[51] The costs award should also be reduced by $2,500 to reflect the costs awarded to the applicant for the May 1, 2018 motion.
Final Order for Costs
[52] Given all of the considerations above I make the following orders:
a. The respondent shall receive the sum of $200,000 in costs. This amount includes the respondent’s legal fees, expert’s fees, his personal time at $20,000, Ms. Zusman’s time at $1,000, and the $5,000 awarded to the respondent as per the endorsement of Croll, J. dated October 26, 2017, and HST.
b. Deducted from this amount shall be the sums of:
i. $9,925 for future payment of periodic spousal support to July 1, 2020.
ii. $50,000 for compensatory support.
iii. $2,000 for the May 1, 2018 motion.
c. The total costs payable by the applicant to the respondent are therefore $138,075. The costs are due and payable forthwith.
d. The credit given to the respondent for future periodic spousal support is in no way intended to change his obligation to pay child support and s.7 expenses for both M.K. and R.K.
e. Spousal support payments to the applicant shall terminate as of June 1, 2019 as a result of the credit against the costs award.
f. SDO to issue.
C. Gilmore, J.
Released: May 23, 2019
COURT FILE NO.: FS-13-39062
DATE: 20190523
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Galina Psavka
Applicant
– and –
Robert Kroll
Respondent
REASONS FOR JUDGMENT
C. Gilmore, J.
Released: May 23, 2019