Fielding v. Fielding, 2019 ONSC 833

COURT FILE NO.: FS-12-375231

DATE: 20190204

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

VICTORIA FIELDING Applicant

– and –

JOHN CRAIG FIELDING Respondent

Gary Joseph and Elissa Gamus, for the Applicant

Ilana Zylberman and Michael Zalev, for the Respondent

HEARD: In writing

REASONS ON COSTS

P.J. Monahan J.

I: Overview

[1] On September 28, 2018, I released my reasons on Craig Fielding’s motion to change, as well as in relation to various cross motions brought by Victoria Fielding.[^1] I found that there had been no material change in circumstances since a financial trial held in early 2014 and, accordingly, declined to vary the spousal support order made by Mesbur J. at that financial trial.[^2] With respect to child support, I made certain adjustments necessary in order to take account of the fact that Craig and Victoria’s three children are now approximately four years older than they were at the time of Fielding 2014, and their living arrangements have differed somewhat from what was anticipated by Mesbur J. I also made certain determinations with respect to the framework governing child support on a going forward basis. In other respects, I dismissed the relief sought by the parties.

[2] These reasons set out my determinations in relation to costs. Craig seeks his costs on a full recovery basis in the amount of $669,000. Craig argues that he was the successful party in the litigation and thus is presumptively entitled to his costs. While acknowledging that $669,000 is a significant amount of money, he argues that it is a fair and reasonable amount for Victoria to pay given the manner in which she conducted the litigation. In his view, Victoria did not merely act unreasonably, but her behaviour crossed the high threshold that is required for a finding of bad faith. Moreover, she should have been aware that a costs order of this magnitude was entirely possible given prior costs orders that had been made in earlier litigation between the parties, as well as the amounts she expended on her own costs in connection with the current litigation.

[3] Victoria disputes that Craig is entitled to his costs in the amount claimed for a variety of reasons. She argues that Craig should never have initiated the litigation and should have instead tried to resolve the dispute other than through the court system. She also maintains that there was divided success in that Craig was not fully successful in all of his claims and Victoria was successful in at least some of her claims. She denies that she acted in bad faith, maintaining that she had no malice or intent to harm Craig and that she was guided throughout by what she believed to be in the best interests of this family. In the event that Craig is found to be entitled to his costs, in her view a more appropriate award would be $125,000 if the court does not find any bad faith behaviour on her part, or $200,000 if the court does find that she acted in bad faith.

[4] I find that Craig was clearly the more successful party in this proceeding and thus he is presumptively entitled to his costs pursuant to Rule 24(1) of the Family Law Rules. Given the importance and complexity of the matters at issue, I find the time spent by his legal counsel and financial expert, as well as the rates they have charged, to be reasonable in the circumstances. Although I do not find that Victoria acted in bad faith, I do conclude that she acted unreasonably, which in my view entitles Craig to a costs award in excess of what he would have received on a partial indemnity basis. Moreover, Craig obtained a result at trial that was more favourable than the terms of an offer he made early in the litigation which, had it been accepted, would have resolved a number of the issues in dispute. While I ultimately conclude that this offer does not entitle him to full recovery, I find that he should receive a costs award on a scale that falls somewhere between partial indemnity and full recovery.

Recognizing that the amount of costs claimed by Craig is clearly substantial, Victoria in fact spent more on the litigation than did Craig, taking into account legal fees, HST and disbursements. In effect, having forced Craig to spend hundreds of thousands of dollars in order to respond to her numerous claims, and having spent a similar amount herself in pursuing those claims, Victoria cannot avoid the natural cost consequences that follow when her claims are dismissed. Taking into account considerations of reasonableness and proportionality, I find Victoria is liable to pay Craig $500,000 in costs, inclusive of HST and disbursements. I then set off against this costs award support arrears which I found payable by Craig to Victoria in my September 28, 2018 reasons, for a net amount payable by Victoria to Craig of $476,418, which I order payable by May 3, 2019.

II: Legal Framework Governing Costs Awards in Family Law Proceedings

[5] It is well established that modern family cost rules are designed to foster three fundamental purposes: (i) to partially indemnify successful litigants; (ii) to encourage settlement; and (iii) to discourage and sanction inappropriate behaviour by litigants.[^3] Moreover, as the Court of Appeal emphasized recently in Mattina v. Mattina,[^4] a fourth fundamental purpose of costs awards in family law proceedings is to ensure that cases are dealt with justly, in accordance with Rule 2(2) of the Family Law Rules.

[6] Rule 24(1) creates a presumption of costs in favour of the successful party.[^5] While consideration of success is the starting point in determining costs, this presumption does not automatically require that the successful party be awarded his or her costs.[^6] Entitlement to costs is subject to a variety of factors, including whether the successful party has behaved unreasonably,[^7] whether there has been bad faith conduct,[^8] and the nature of any offers to settle made by either party.[^9]

[7] In determining the appropriate quantum of costs, Rule 24(12) sets out the relevant considerations. It provides as follows:

(12) SETTING COSTS AMOUNTS – 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] While Rule 24(12) sets out the relevant considerations, the key principles governing awards of costs in family law proceedings are proportionality and reasonableness. As Nordheimer J.A. stated recently in Beaver v. Hill,[^10] “[p]roportionality is a core principle that not only governs the conduct of proceedings generally, but is specifically applicable to fixing costs in family law matters.” This conclusion flows directly from the fundamental Boucher principle, applied by Ontario courts on innumerable occasions, that costs awards should reflect “what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties.”[^11]

[9] Nor is there any principle mandating that a successful party should receive costs that “generally approach full recovery”.[^12] In fact, any such “full recovery” principle would be inconsistent with the first objective of costs awards as set out by the Court of Appeal in Serra, which is that costs are intended to “partially indemnify successful litigants”. While the Rules contemplate full recovery in specific circumstances, such as bad faith under Rule 24(8), or besting an offer to settle under Rule 18(14), the quantum of costs must always meet the test of proportionality and reasonableness in light of the importance and complexity of the issues at stake in the litigation.

III: Relevant Considerations in Determining Costs in this Litigation

A. Commencement of the Litigation

[10] As described more fully in my Reasons, this litigation was prompted by the fact that in September 2016, Craig and Victoria’s two younger children, Sean and Natalie, began their university studies at out-of-town universities. Mesbur J. in Fielding 2014 had ordered that during the months in which their older daughter Katie was attending university out of town, no table child support would be payable by Victoria to Craig. Craig was of the view that this identical framework should apply to Sean and Natalie while they were attending university away from home. On July 8, 2016, in anticipation of Sean and Natalie’s upcoming moves, Craig’s counsel wrote to Victoria’s counsel to request that table child support for Sean and Natalie should cease commencing September 2016. Craig’s counsel also asked Victoria to provide the details of the s. 7 expenses that she was claiming, so that the parties could try to resolve that issue.

[11] Victoria refused to accept Craig’s request to adjust the child support arrangements or provide him with the requested information about her s. 7 expenses. Thus, on November 2, 2016, Craig commenced this motion to change (the “Motion to Change”), seeking confirmation that he was not required to pay table child support for the months in which Sean and Natalie were away at university. Craig also sought updated financial information from Victoria and reimbursement for various minor expenses incurred by Craig in relation to the matrimonial home.

[12] In her response filed on December 7, 2016 (the “Response”), not only did Victoria argue that Craig’s Motion to Change should be dismissed, she sought to reopen numerous matters that had been determined by Mesbur J. in Fielding 2014. Victoria argued that spousal support should be significantly increased since Craig’s income had been significantly understated in the financial trial and she had been deprived of a “proper hearing on the merits”. She further sought significant increases in the quantum of child support payable by Craig for Sean and Natalie, along with an order that Craig should be required to pay table child support for Sean and Natalie while they were away at school. Conversely, she argued that her obligation to pay child support for Katie should be terminated retroactive to August 28, 2014. Victoria also sought various other forms of relief, including an order tripling the amount of life insurance that Craig was required to maintain to secure his child and spousal support obligations (from the $750,000 ordered by Mesbur J. to $2,500,000), and a variation of Justice Mesbur’s dismissal of her request that spousal support be indexed.

[13] Just prior to the trial in Fielding 2014, Craig had accepted Victoria’s proposal that his income should be stipulated to be $850,000 for child and spousal support purposes. Victoria’s Response made it plain that she now wished to reopen that issue and relitigate Craig’s actual income dating back to 2014. Victoria took the position that the income report submitted by Craig at the financial trial had been “significantly flawed” in that it failed to take account of unreported cash income, did not apply a proper gross up on certain lower-taxed income sources, and allowed Craig to book extensive personal or discretionary expenses as business expenses.

[14] On January 24, 2017, Craig responded by indicating that he agreed with Victoria that the child support arrangements should be varied to take into account his actual income for support purposes, of Victoria’s actual income for support purposes, and of the living arrangements for the children. However he did not agree that Victoria’s obligation to pay child support for Katie should be terminated, since Katie was then 20 years old and in her third year of full-time undergraduate studies. He also did not agree that there should be any variation in Mesbur J.’s spousal support order since there had been no material change in circumstances since the making of that order. Craig further maintained that the other changes sought by Victoria in her Response should be dismissed.

B. Initial Offers to Settle

[15] In 2017, the parties exchanged initial offers to settle. However neither offer represented a significant compromise in either party’s position. Craig’s January 24, 2017 offer invited Victoria to agree (on a severable basis) to have a variety of her claims in the Response dismissed without costs. Victoria’s October 23, 2017 offer provided that Craig’s income for support purposes would be fixed at $1,400,000 for 2014, $1,500,000 for 2015, $1,600,000 for 2016, and $1,700,000 for 2017. However Victoria’s offer did not propose a settlement of the amount of support that Craig would have been required to pay, either on account of spousal or child support.

C. Victoria’s Disclosure Motion

[16] On December 22, 2017, Victoria brought a motion seeking to compel Craig to allow her expert to conduct a forensic audit of his medical practice. Her motion materials included allegations that Craig was receiving significant amounts of unreported cash income. These claims were set forth in affidavits from three chartered business valuators deposing that they believed Craig came home from work during his marriage to Victoria with wads of cash, that Craig was guilty of tax evasion and that he had provided a suspicious story of how cash from his practice was handled.[^13]

[17] Victoria’s disclosure motion came before Backhouse J. on February 8, 2018. In her February 9, 2018 Endorsement dismissing Victoria’s motion, Backhouse J. noted that Victoria had previously brought two similar disclosure motions, the first before Kiteley J. on January 17, 2013, and the second before Paisley J. on August 15, 2013. Both of these motions had been dismissed on the basis that there was simply no basis or justification for conducting a forensic audit of Craig’s professional practice. Backhouse J. further noted that proportionality in this case was completely lacking, that Victoria’s allegations of fraud did not rise above conjecture, and that her disclosure request continued to be a fishing expedition. She concluded as follows:

This motion should not have been brought. Significant expense has been incurred. From an objective standpoint, this can only be characterized as a campaign by the Applicant to harass the Respondent. The motion is dismissed.

[18] In her Costs Endorsement released March 23, 2018, Backhouse J found that the “high threshold that is required for a finding of bad faith has been met against the Applicant.” She relied in particular on correspondence provided by Victoria’s counsel suggesting that Craig would be put through at least four more trials and over $1 million in legal and professional fees unless he accepted her offer to settle.[^14] Backhouse J. further found that the significant amount of time spent by Craig’s counsel, as well as their hourly rates, were reasonable in the circumstances. She noted that Craig had been required to respond to affidavits filed by three chartered business valuators alleging fraud in the operation of his business. Victoria herself had spent $94,000 in fees on one of these three valuators. In Backhouse J.’s view, it was reasonable to have three lawyers engaged in responding to this disclosure motion. She awarded Craig $75,000 in costs, less a set-off of $1,000 on account of an incorrectly filed affidavit, for a net amount payable of $74,000.

D. Victoria’s February 22, 2018 Offer to Settle

[19] On February 22, 2018, Victoria served an offer to settle that provided that Craig would pay her $1,700,000 net (i.e. on an after-tax basis) in full and final settlement of all claims for child and spousal support. The offer also would have required Craig to give up the $74,000 in costs that Backhouse J. ordered Victoria to pay on account of the dismissal of the disclosure motion. As such, it would have cost Craig a total of $1,774,000 net to accept her offer.

[20] The cover email that accompanied this offer indicated that if Craig failed to accept it, he would face at least four more trials at a cost that could exceed $1 million in legal and professional fees before he retired. The relevant portion of the email stated as follows:

“This Offer provides our clients with a way to end their litigation now and in the future. It provides our clients with an end to future litigation which at this point includes at least 4 trials:

1. When Sean finishes his first degree

2. When Natalie finishes her first degree

3. When our client turns 65 and is no longer in receipt of her disability income

4. Your client’s retirement

5. This upcoming trial

6. As your client’s income continues to increase in the future

There will also be no longer a need and in fact a requirement for your client to provide financial disclosure to our client.

This Offer provides your client with the opportunity to save hundreds of thousands of dollars if not seven figures in legal and professional fees before he retires.”

[21] No explanation was provided as to why these future events (i.e. the completion of Sean’s and Natalie’s postsecondary education, Craig’s retirement, or the termination of Victoria’s disability income) should necessarily require additional trials. The clear implication is that Victoria was signalling her determination to force Craig into additional expensive trials whenever the opportunity presented itself. The spectre of this “litigation war of attrition” was being used as a mechanism to force Craig to settle the litigation on Victoria’s proposed terms.

[22] Victoria’s counsel characterized her offer to settle as providing a “savings” to Craig in terms of future litigation costs whereas, in fact, the offer proposed a settlement amount that was clearly unreasonable and did not represent a genuine attempt to compromise her claim. Craig was already 60 years old at the time the offer was made, which means that he would have to continue paying support to Victoria at current levels until he is well into his 80s before his support payments would add up to $1,774,000 on an after-tax basis. I accept Craig’s submissions that he will be forced to retire well before then, given that his work as a plastic surgeon requires very steady hands and the ability to spend long hours standing at an operating room table. Moreover, Sean and Natalie are now 20 years old and thus it can be expected that Craig’s future child support obligations to them will be reduced or eliminated within the foreseeable future. In short, Victoria was attempting to force Craig to agree to extremely onerous settlement terms which would otherwise have been unacceptable to him, by threatening years of ruinous litigation.

E. Victoria Retains a New Expert and Renews Disclosure Demands

[23] As noted above, Victoria’s chartered business valuators withdrew from the litigation on February 1, 2018. Victoria proceeded to retain a new business valuator, Brian Mozessohn of SLF Valuations Inc. (“Mozessohn”) in early March 2018. On April 16, 2018, Mozessohn sent a detailed 11-page disclosure request that included many of the same items which had been considered and rejected by Backhouse J. For example, Mozessohn requested a report detailing all of the patients of Craig’s practice for the 2017 fiscal year, the dates of their appointments, the estimates for any procedures, the dates any procedures were performed, any amounts paid along with the method of payment, and a copy of all receipts. Counsel for Craig responded by noting that many of the requested items had already been provided to Victoria’s earlier business valuator, while many others had already been disposed of by Backhouse J.

[24] Mozessohn had obtained Craig’s banking records from 2014 onward. On May 20, 2018, Mozessohn provided Craig’s expert, Steve Ranot (“Ranot”), with a 91-page spreadsheet identifying over 2600 transactions into or out of these accounts. Mozessohn requested “detailed explanations with supporting documentation” as to why the deposits into the accounts in each year exceeded the revenue from Craig’s professional practice.

[25] On May 25, 2018, Mozessohn filed his expert report on Craig’s income for the 2014 to 2017 period. Mozessohn found that Craig’s income was significantly higher than that calculated by Ranot. Mozessohn also attached the 91 page spreadsheet summarizing the 2600 transactions in Craig’s bank accounts, describing this as a “Scope Limitation” on his conclusions. He noted that in the five days since he had sent the request he had not been provided with a satisfactory explanation as to the “unexplained deposits” into these accounts and that, upon receiving the requested information, he might well revise his income calculations significantly.

[26] While Victoria was ultimately permitted to file her expert income report late,[^15] the length and complexity of Mozessohn’s May 20, 2018 request along with his May 25, 2018 report required significant effort, both by Craig’s counsel as well as his business valuator, in order to respond appropriately. Moreover because the Mozessohn documentation was filed less than two weeks prior to the commencement of the trial, the preparation of responding materials had to be done on an extremely compressed timeframe. As discussed below, I find these considerations to be relevant in determining the appropriate quantum of costs.

F. The Parties’ Final Offers to Settle

[27] At a Settlement Conference on April 23, 2018 before Justice Kiteley, the parties had been directed to exchange further offers to settle the case on the basis of Craig paying a lump sum to Victoria to settle all outstanding claims. In accordance with Justice Kiteley’s direction, on April 27, 2018 Craig sent Victoria a proposal to pay her $450,000 net, and to bear his own costs in exchange for a full release of all claims. Craig’s offer contained a reasoned and detailed explanation of how he had arrived at this $450,000 figure.

[28] On May 28, 2018, Craig served an offer to settle the issue of the parties’ s. 7 expenses, which provided that each child’s University expenses would be fixed at $25,000 a year, and that Victoria could choose the amount of money that each child would be expected to contribute to their costs. In the cover letter that accompanied the offer, Craig’s counsel expressed serious concern that “we are on the verge of wasting an inordinate amount of the court’s time and our respective client’s money to try to determine the “exact” cost of each child’s shareable university expenses.” Counsel noted that this issue should not be litigated, since “counsel and the parties have an obligation to avoid wasting court time on this type of thing.” Counsel further offered to have the allowable university expenses slightly increased (to $28,000 per year) or decreased (to $22,000) since “these small amounts are not worth litigating”.

[29] Just prior to the commencement of the trial, Victoria made four separate offers to settle the litigation. The first, on May 28, 2018, offered to settle the issue of Craig’s income for support purposes for the years 2014 to 2018 inclusive. The income levels stipulated in the offer were based on those set out in Mozessohn’s May 25, 2018 report, plus another $100,000 a year for unreported income. However because the offer only dealt with Craig’s income levels, as opposed to the amount of support that he would have to pay, accepting it would not have ended the litigation.

[30] On June 1, 2018, Victoria served an offer to settle that provided that Craig would pay her $1,500,000 net in full and final settlement of all child and spousal support claims. Although this represented a reduction in the settlement amount proposed in Victoria’s earlier offer of February 22, 2018, it still represented an extremely generous settlement from her perspective, given Craig’s age and profession, and the ages of the children.

[31] Later that day, Victoria served a second offer to settle that dealt with s. 7 expenses. The offer is difficult to understand, since it included dozens of pages listing specific expenses, without relating those expenses to the categories that had been authorized by Mesbur J. in Fielding 2014. In fact, Victoria proposed that the permissible s. 7 expenses should be expanded beyond the categories established by Mesbur J., without proposing any alternative framework for the determination of s. 7 expenses.

[32] On June 3, 2018, Victoria provided her final offer to settle which proposed that Craig would pay her $140,000 net to settle claims for retroactive child and spousal support. The offer also provided that child support obligations for Katie terminated on December 31, 2016. Victoria further proposed that Craig’s spousal support payments would be increased from $10,000 per month to $13,000 per month, and he would pay $8000 a month in ongoing child support.

G. The Trial

[33] In her opening statement at trial, Victoria took the position that Backhouse J. had been mistaken in her earlier February 9, 2018 Endorsement, when she found that Victoria was engaged in a campaign of harassment against Craig. Victoria noted that Backhouse J.’s finding was made “without the benefit of oral evidence and cross-examination”. Victoria took the position that, with the assistance of her affidavit filed at trial and her oral evidence, the court would see the “reality that she is simply trying to obtain support for her children and herself, based on the Husband’s true income from all sources.” She noted that she had been married to Craig for almost 20 years and that, because "she knows his financial and personal patterns", her concerns over his unreported cash income were well-founded, despite Backhouse J.’s express findings to the contrary.

[34] This opening statement set the stage for the trial, a substantial portion of which was devoted to the determination of Craig’s “true income”. There were two expert income reports filed, one by each of the parties. Although I disagreed with certain of Ranot’s specific conclusions, I largely accepted his evidence regarding Craig’s income, and attached little or no weight to Mozessohn’s report or his evidence. In fact, I found that Mozessohn failed to undertake his analysis with the independence and neutrality that is expected of expert witnesses in our courts. Instead of providing the court with an independent and credible calculation of Craig’s income, he adopted positions that would result in the highest possible income calculations for Craig. Moreover, he failed to comply with the relevant portion of the Family Law Rules, which require that he list every document relied on in forming his opinion. In that regard, Mozessohn failed to disclose that he relied upon memoranda prepared by Victoria’s counsel, regarding the imputation of income on investment gains within Craig’s registered investment accounts.

[35] Although Mozessohn advanced numerous positions that I ultimately did not accept (and in some cases found to be without foundation), the cross examination undertaken by Craig’s counsel played a critical role in identifying the weaknesses and shortcomings in his evidence. Many of the propositions put forward by Mozessohn, particularly with respect to the interpretation of s. 19 of the Child Support Guidelines (the “CSG”), raised issues that were legally complex. Without the assistance of Craig’s counsel, supported by Ranot, the task of assessing the reliability and validity of this expert evidence would have been immeasurably more difficult.

[36] Also relevant in terms of the determination of costs is the fact that Mozessohn shifted his position in the course of the trial, with his reply evidence differing in certain material respects from his evidence in chief. In particular, in his reply evidence he took the position that any deposits into Craig’s accounts that were “unexplained” should be imputed as income. Given that there were proximately 2600 transactions identified on a 91 page spreadsheet prepared by Mozessohn, it required a significant amount of time and effort to work through all of these transactions, identify the deposits that were “unexplained”, and undertake due diligence necessary to provide an explanation. Much of this work had to be done while the trial was going on. By the end of the trial, with the benefit of the due diligence undertaken by Craig’s counsel, assisted by Ranot, I found that there were reasonable explanations for the vast majority of these “unexplained deposits.”

[37] It should also be pointed out that certain positions advanced by Mozessohn in his report were based on advice or instructions provided by Victoria, through her counsel. I have already noted the fact that Mozessohn imputed income on investment gains within Craig’s registered investment accounts, even though no funds have been withdrawn from those accounts, on the basis of undisclosed memoranda received from Victoria’s counsel. Victoria’s counsel also instructed Mozessohn to impute income on $64,000 that had been paid by Craig to Victoria in May 2014, as well as on 50% of the purchase price of the cottage that Craig had jointly acquired with his current wife in July 2015. I found all of these positions to be without merit.

[38] In the result, I found that Craig did not have any unreported cash income, and found that his income was largely as set out by Ranot. This meant that Craig’s actual income was less than the $850,000 he had agreed to in Fielding 2014. Nevertheless, Craig maintained that there had been no material change in circumstances that would justify a variation in spousal support. Therefore he was content to continue to pay spousal support on the basis of the $850,000 income figure that had been agreed to in Fielding 2014.

[39] There were relatively few areas of dispute with respect to the calculation of Victoria’s income. I accepted her position that the carrying costs associated with a loan that is being used to earn investment income should be deducted from her income for support purposes. However I did not accept her position that she should be entitled to deduct her legal fees associated with her matrimonial litigation.

[40] With respect to child support, the parties were agreed that child support obligations from 2015 onward should be based on the parties’ actual incomes, as well as the actual (as opposed to the anticipated) living arrangements for the children. I accepted Craig’s position that he should only be required to pay table child support for Sean and Natalie for those months in which they were actually residing with Victoria. I also accepted Craig’s position that child support for Katie should terminate April 30, 2018 (rather than December 31, 2016, the position advanced by Victoria at trial). In the result, I found that Craig had underpaid table child support by $989 since 2014.

[41] With respect to s. 7 expenses, Victoria had considerable difficulty in presenting her claims for amounts she had already spent in an organized and comprehensible manner. During the course of the trial, I had instructed the parties to review their respective claims for prior s. 7 expenses, and identify those expenses which were accepted by both parties and those which remained in dispute. The parties were unable to produce these calculations by the end of trial on June 15, 2018. Following a further hearing in July 2018, the parties were instructed to provide the Court with supplementary written submissions summarizing their expenses claimed, explaining how those expenses fit within the framework established by Mesbur J., and identifying expenses claimed by the other party which had not been accepted. Through this process, each party withdrew certain expenses that had initially been claimed, accepted expenses claimed by the other that had initially been disputed, such that ultimately the differences between the parties narrowed somewhat.

[42] Far more time was spent on this issue that should have been required, given the clear framework set out by Mesbur J. for the determination of s. 7 expenses. Although both parties continued to dispute certain expenses claimed by the other, I found that the most prudent and proportionate approach in the circumstances was simply to accept the expenses claimed by both parties. In order to reduce disputes in the future, I also set out a framework to govern s. 7 expenses on a going forward basis, which attempted to further clarify the categories established by Mesbur J. in Fielding 2014.

[43] The parties had agreed to an order clarifying Craig’s obligation to maintain Victoria on his extended medical and dental coverage for so long as he is required to pay spousal support. Other than that, the other claims in the litigation were dismissed, including Victoria’s claim that spousal support should be indexed, and her claim that Craig’s obligation to increase his life insurance to secure child and spousal support should be increased from $750,000 to $2,500,000.

IV: Entitlement to Costs

[44] In her cost submissions, Victoria argues that success in this proceeding was divided and that neither party was the “clear winner”. She maintains that, although Craig was successful in a number of respects, Victoria was not “completely unsuccessful” and did in fact prevail on a number of issues, including the determination of her income, adjusting table child support to take account of the fact that Sean has been living with her, and that she and not Craig was owed arrears in respect of both table child support and reimbursement for s. 7 expenses.

[45] As Chappel J. noted recently in Thompson v. Drummond,[^16] the determination of whether success was truly “divided” in a proceeding does not involve merely adding up the number of issues in dispute and “running a mathematical tally of which party won more of them”. Rather, it requires a “contextual analysis that takes into consideration the importance of the issues that were litigated and the amount of time and expense that were devoted to the issues which required adjudication.”

[46] Viewed in context, while it is true that Victoria was not entirely unsuccessful and did obtain certain results which she was seeking, it is also the case that Craig was clearly successful on virtually all of the key issues that were the focus of this litigation. This emerges from the following:

1. the issue which gave rise to this litigation was whether Craig was required to pay table child support for Sean and Natalie during the months in which they were attending university out-of-town. Craig was successful on this issue;

2. Craig was successful on the central issue which took up the largest amount of time at trial, namely, the determination of his income for support purposes. I rejected the various arguments advanced by Victoria’s financial expert that significant income should be imputed to Craig on the basis of s. 19 of the CSG. I also rejected the claim that Craig had significant unreported cash income. With certain exceptions, I largely accepted Craig’s income as proposed by his expert;

3. Craig was also successful on a second major issue at trial, which was whether Victoria was entitled to a significant increase in spousal support. I found that there had been no material change in circumstances since Fielding 2014, and thus no basis to vary the spousal support order made by Mesbur J.;

4. I rejected Victoria’s argument that the parties’ child support obligations to Katie terminated on December 31, 2016 and, instead, accepted Craig’s argument that child support to Katie terminated on April 30, 2018;

5. while I found that Craig had underpaid table child support by $989 between 2014 and May 31, 2018, this represented less than 0.5% of the table child support which he actually paid over the four years in question, and was far less than the amounts sought by Victoria;

6. I rejected Victoria’s claims that her spousal support should be indexed, and also that Craig should be required to triple the amount of life insurance which he has obtained to secure his child and spousal support obligations.

[47] It should be noted that Craig was not entirely successful in the proceeding. For example, one significant issue at trial was the extent to which the parties were entitled to reimbursement for amounts paid in respect of s. 7 expenses. Ultimately I accepted the amounts claimed by both parties, with the result that there was divided success on this particular issue. I also accepted Victoria’s position on the calculation of her income for child support purposes. However there was minimal dispute over Victoria’s income, with the only real issue being whether Victoria was entitled to deduct the interest and/or carrying charges associated with the loan that is being used by her to earn investment income and that is secured by a mortgage on Victoria’s current residence. Although I accepted Victoria’s submission that the interest and carrying charges were deductible from income, minimal attention was paid to this issue during the course of the trial.

[48] In short, Craig was manifestly the more successful party in this proceeding, with his position prevailing on virtually all the major issues at trial. He is therefore presumptively entitled to his costs under Rule 24(1).

[49] Nor is there any reason to deprive Craig of part or all of his entitlement to costs, in accordance with Rule 24(4), on the basis that he behaved unreasonably. Rule 24(5) provides that in deciding whether a party has behaved reasonably or unreasonably, the court shall examine the party’s behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle; the reasonableness of any offer the party made; and any offer the party withdrew or failed to accept.

[50] Over the course of this litigation, Craig made a number of offers to settle which were generally reasonable. On January 24, 2017, Craig offered to have the following claims being advanced by Victoria dismissed: (i) her claim to vary Mesbur J.’s spousal support order; (ii) her claim that child support for Katie should be terminated as of August 28, 2014; (iii) her claim that spousal support should be indexed for inflation; and (iv) her claim that Craig should be required to provide $2.5 million of life insurance to secure his child and spousal support obligations. The elements of the offer could have been accepted on a severable basis.

[51] I note that all four of Victoria’s claims referenced in Craig’s January 24, 2017 offer were in fact dismissed at trial. In this sense, Craig obtained results at trial on these particular issues that were as favourable as those set out in his offer. I consider below the cost consequences of this offer in light of Rule 18(14).[^17] For present purposes, I note that even if Craig’s offer had been accepted, a number of contentious issues would have remained, including the determination of Craig’s income for child support purposes. Nevertheless, given the result obtained at trial, the proposals set out in Craig’s initial offer were reasonable and should have been carefully considered, if not accepted, by Victoria

[52] Mention should also be made of Craig’s May 28, 2018 offer to settle the issue of s. 7 expenses. As described above, Craig offered to simply fix the University expenses for Sean and Natalie at an amount ranging between $22,000 and $28,000 per year. This was a sensible and cost-effective way of resolving the matter, since it would have avoided the necessity of the parties annually reviewing and disputing individual expense items, an exercise which was simply not worth the time or expense involved. In fact, Craig’s proposal was similar to that adopted by the court at trial, where I specified certain allowable s. 7 expenses and then provided for a lump-sum payment of $600 per month for each of Sean and Natalie to cover all of their day-to-day living expenses. The result was to provide each of Sean and Natalie with approximately $30,000 per year to fund their postsecondary education, while avoiding the necessity for the parties to have to engage with each other in reviewing individual expense claims. This $30,000 annual expense amount is just slightly above Craig’s proposal in his May 28, 2018 offer to fix the annual university costs for each child at up to $28,000.

[53] I also note that Craig’s positions at trial were generally reasonable. For example, he did not seek to vary the spousal support order made by Mesbur J., despite the fact that his actual income was determined at trial to be somewhat less than the $850,000 which had been agreed to in Fielding 2014. He was content to continue paying spousal support on the basis of this higher income figure,

[54] Mesbur J. had reduced Craig’s entitlement to costs in Fielding 2014 on the basis that his disclosure was difficult and lacking, and Victoria argues that he similarly failed to provide timely disclosure in this proceeding. In this case, however, I see no basis for finding that his disclosure in this case was insufficient or unreasonable. As Backhouse J. found in her February 9, 2018 Endorsement dismissing Victoria’s disclosure motion, Craig provided a significant amount of disclosure, in accordance with the disclosure requirements of Mesbur J.’s order in Fielding 2014. While Craig did not provide Victoria with everything that she asked for, this was because Victoria’s requests were excessive and unreasonable. Craig had also offered to have his income valuator meet with Victoria’s in an effort to narrow their differences, an offer that was rejected by Victoria as premature. Backhouse J. disagreed that such a meeting was premature and found that a discussion between the income valuators, as proposed by Craig, might well have avoided the disclosure motion entirely.

[55] Victoria also argues that Craig should never have initiated this litigation and instead should have attempted to resolve any disputed matters out of court. In fact Craig did make such an attempt in July 2016, when his counsel wrote to Victoria’s counsel seeking her agreement that he did not need to continue providing child support for Sean and Natalie during the university school year while they were not residing with Victoria. He also asked for details of any s. 7 expenses that she was claiming from him. It was only when she refused to accept these reasonable proposals that he commenced this proceeding in November 2016.

[56] Accordingly, I find that Craig is presumptively entitled to his costs as the successful party, and there is no basis for modifying or reducing this entitlement on the basis of Rule 24(4).

V. Amount of Costs

[57] As noted previously, the key principles governing the determination of the amount of costs are reasonableness and proportionality. These two principles are highlighted in amended Rule 24(12), which directs the court to consider “reasonableness and proportionality” in relation to six factors identified in the subrule, in light of the importance and complexity of the issues at stake in the litigation. The central role of reasonableness and proportionality in fixing costs in family law matters has also been reinforced and emphasized by the Court of Appeal in Beaver v. Hill.

A. Victoria Acted Unreasonably in this Litigation

[58] I have already found that Craig acted reasonably in this litigation. I am further of the view that Victoria acted unreasonably, in light of the various factors identified in Rule 24(5) as well as her conduct of the litigation in general. I would note in particular the following:

1. Craig’s November 2, 2016 motion to change involved a limited number of discrete issues which could have been resolved satisfactorily with minimal cost. Instead of attempting to address and resolve those issues, Victoria responded by attempting to reopen almost every aspect of Mesbur J.’s order in Fielding 2014. Amongst other things, Victoria sought a significant increase in Craig’s spousal support payments, an order requiring Craig to pay table child support for Sean and Natalie while they were away at school, an order terminating her child support obligations for Katie retroactive to August 28, 2014, and a variation of Mesbur J.’s dismissal of her request that spousal support be indexed. In essence, having unsuccessfully appealed Mesbur J.’s order in Fielding 2014, Victoria was seizing the opportunity presented by Craig’s motion to change in order to relitigate matters that had been determined by Mesbur J. just two and a half years earlier;

2. Victoria’s offers to settle were on the whole unreasonable and did not reflect a willingness to meaningfully compromise her claims. For example, her October 23, 2017 offer provided that Craig’s income for support purposes would be fixed at $1,400,000 for 2014, rising to $1,700,000 for 2017. As evidenced by my findings at trial, these proposed income figures were exorbitant. Victoria’s February 22, 2018 offer to settle the litigation on the basis of an immediate lump-sum payment of $1,774,000 on an after-tax basis was similarly unreasonable, for the reasons described above.[^18] Although Victoria subsequently offered to accept a lump-sum payment of $1,500,000 net to settle her claims, even this revised offer was clearly excessive and unreasonable, given Craig’s age, the remaining years he can be expected to work, and the ages of Sean and Natalie;

3. Backhouse J. had already found that the cover letter accompanying Victoria’s February 22, 2018 offer to settle, which threatened a minimum of four additional trials if Craig did not accept her offer, amounted to bad faith conduct on her part. Although she did not appeal Backhouse J.’s finding of bad faith, Victoria continued to seek the very disclosure that Backhouse J. had found to be unreasonable and without merit. Victoria retained a new financial expert who renewed many of the disclosure requests that had been rejected by Backhouse J., and also continued her efforts to prove that Craig was receiving significant unreported cash income, which Backhouse J. had described as “a campaign by the Applicant [Victoria] to harass the Respondent [Craig].” At trial, Victoria disputed Backhouse J.’s finding of bad faith on the basis that it had been made without the benefit of oral evidence and cross-examination. She maintained that “the Court [i.e. Backhouse J.] has misunderstood her” and that the reality is that she is “simply trying to obtain support for her children and herself, based on the Husband’s true income from all sources.” I find her refusal to accept the express findings of Backhouse J., and to persist in the very conduct that this Court had expressly disapproved, to be unreasonable;

4. Victoria persisted in allegations of fraud in relation to Craig, allegations which Backhouse J. had found to be based on “mere conjecture” and which, at trial, were determined to be unsubstantiated. Victoria argues that her allegations that Craig was receiving substantial cash income were not unreasonable, in light of the fact that in Fielding 2014, Craig had agreed to an income for support purposes of $850,000. In her view this $850,000 income figure included $125,000-$150,000 of cash unreported income. However, this very argument was made before Backhouse J., who found that “the inference she [Victoria] draws from the Respondent’s acceptance of her offer to fix his income at $850,000 is not the only reasonable inference that can be drawn.” Backhouse J. reviewed the history of the prior proceedings involving these parties and determined that “there is nothing in the Record that makes [Victoria’s disclosure request] appropriate” and that Victoria’s “allegation of unreported income is only that”;

5. Even assuming that Victoria believed that Craig had significant unreported cash income due to his acceptance (in Fielding 2014) of her offer to fix his income at $850,000, during the course of this trial Craig provided explanations for virtually all of the “unexplained deposits” identified by Mozessohn in his 91 page “Scope Limitation”. As such, by the end of trial it was (or should have been) apparent that the allegation of significant unreported cash income had not been made out.[^19] Nevertheless in her closing submissions, Victoria’s counsel continued to take the position that Craig was in receipt of substantial unreported cash income, and that it was therefore appropriate to add approximately $100,000 to his annual income for support purposes to take account of this unreported income;

6. Victoria maintains that she did not plead or allege fraud but merely claimed that Craig’s income was higher than he reported. She argues that this is not an uncommon allegation in family law cases, especially with a self-employed person who has control over his income and expenses. I agree that Victoria did not use the express term “fraud”, but it is not necessary for a party to expressly plead fraud where that is in substance what is being alleged.[^20] Her argument was that Craig was receiving over $100,000 annually of unreported cash income, and that he had been attempting to deceive Victoria, the court, and the Canada Revenue Agency. In her January 25, 2018 Endorsement, Backhouse J characterized Victoria’s claim as involving “an allegation of fraud”, and I would describe the substance of the position taken at trial in identical terms;

7. Victoria also instructed her financial expert to impute certain income to Craig based on s. 19 of the CSG, including income that Craig supposedly could have been earned on amounts that he had previously paid to Victoria, as well as income that could have been earned on 50% of the purchase price that Craig had paid to jointly acquired a cottage property with his current wife. These positions were included in Mozessohn’s report “for the court’s consideration”, and Mozessohn was required to defend them in his testimony. In my reasons, I found the arguments advanced in support of these positions to be without merit;

8. Rule 20.1 imposes an obligation on experts who provide evidence in relation to a case to provide opinion evidence that is “fair, objective and nonpartisan”. Conversely, Rule 20.1 imposes a corresponding or reciprocal obligation on the parties themselves to respect the independence of the experts they retain, and to refrain from efforts to compromise or undermine that independence. Instructing Mozessohn to impute income to Craig in circumstances where he might not have otherwise reached that conclusion, and putting him in the position of having to defend those conclusions at trial, detracted from his independence. Without in any way detracting from Mozessohn’s duty to maintain his independence, in my view the instructions given by Victoria through her counsel should not have been given.

[59] The cumulative effect of these considerations and findings, taken as a whole, leads to the conclusion that Victoria acted unreasonably in this litigation.

B. Victoria Did Not Act in Bad Faith

[60] Craig urges me to find that, not only did Victoria act unreasonably, but her conduct amounted to bad faith and should attract the cost consequences provided for in Rule 24(8). Rule 24(8) requires a fairly high threshold of egregious behaviour and, as such, a finding of bad faith is rarely made. In a passage that has been frequently cited in this context, Perkins J. in S. (C.) v. S. (M.),[^21] defined “bad faith” in the following terms:

To come within the meaning of bad faith in R. 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisite intent to harm, conceal or deceive does not have to be the person’s sole or primary intent, but rather only a significant part of the person’s intent. At some point, a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behaviour is causing the other party major financial harm without justification.

[61] It is also clear, as noted by Pazaratz J. in Chomos v. Hamilton,[^22] that bad faith is not synonymous with bad judgment or unreasonable behaviour. Bad faith involves “intentional duplicity, obstruction or obfuscation… The essence of bad faith is when a person suggests their actions are aimed for one purpose when they are aimed for another purpose.”

[62] As Backhouse J. has already found, it is clear that the February 22, 2018 letter from Victoria’s counsel, which threatened a minimum of four additional trials if Craig did not accept her attached offer to settle, constituted bad faith. Victoria, through her counsel, was threatening to inflict financial harm upon Craig through the family court system in an effort to induce him to settle the litigation on terms dictated by her. But Backhouse J. has already considered the February 22, 2018 letter and taken into account that bad faith conduct through the substantial indemnity costs she ordered in relation to the disclosure motion.

[63] Although I have found her continued pursuit of the issue of unreported cash income to be unreasonable, in my view it does not rise to the level of bad faith. There was no dishonest purpose or moral obliquity in her subsequent conduct, nor is there evidence of malice or intent to harm. Rather, in the words of Perkins J., her conduct reflected a “misguided but genuine intent to achieve the ostensible goal of the activity”, namely, to identify income which she genuinely believed Craig was earning but not reporting. Therefore, Victoria’s conduct does not meet the high threshold required to sustain a finding of bad faith.

C. Craig’s January 24, 2017 Offer satisfies Rule 18(14)

[64] Craig argues that his January 24, 2017 Offer satisfies the requirements of Rule 18(14) in that he obtained an outcome that is as favourable as the terms of the offer. In particular, he was successful in having all of the claims identified in the offer dismissed at trial, as proposed in his offer. Craig therefore argues that he is entitled to his full recovery costs from January 24, 2017 onward in respect of the matters referenced in his offer, in accordance with Rule 18(14).

[65] Victoria responds by pointing out that the January 24, 2017 offer also specified that the parties would bear their own costs if the offer was accepted prior to February 1, 2017 and that, after February 1, 2017, Victoria could only accept it if she paid Craig’s costs. Victoria relies on Chomos v. Hamilton, in which Pazaratz J. held that Rule 18(14) contemplates full indemnity costs only where all of the terms of an offer have been obtained in the trial judgment. Pazaratz J. held that an offer which includes cost obligations not yet determined by the court cannot satisfy the strict requirements of the subrule.[^23]

[66] Craig argues that his offer merely provided that Victoria would pay Craig his costs “in an amount to be agreed upon by the parties or as determined by the court.” He argues that since he is clearly entitled to costs, the result he achieved at trial is exactly the same as his offer.

[67] With due respect to the contrary view, in my view Craig’s January 24, 2017 offer met the requirements of Rule 18(14). At trial, Craig obtained the very substantive relief which he proposed in his offer, namely, to have certain of Victoria’s claims dismissed. Moreover, while he sought his costs, he did not predetermine the amount of costs but merely left those costs to be determined by the court. It would have been open to the court to deny him his costs altogether, or to award a nominal amount.

[68] I see no reason in principle to characterize such an offer as falling outside the terms of Rule 18(14). It is entirely commonplace and appropriate in offers to settle to make reference to the cost consequences associated with acceptance of the offer. This provides the parties with certainty as to what will follow if the offer is accepted, which is in both parties’ interests. Thus it would be anomalous if, merely by providing that costs are to be “as determined by the court”, an offer that in all other respects is at least as favourable as the result obtained at trial is nevertheless found to be noncompliant with Rule 18(14). This would allow a party who chooses to simply ignore an entirely reasonable offer and insists on pushing the matter on to trial, to nevertheless escape the negative cost consequences that should normally follow from such unreasonable litigation conduct. In my view, this result would be contrary to the purpose of Rule 18(14), which is to encourage early settlement through offers to settle.

[69] I note that in the civil context, it is commonplace for offers which make reference to costs consequences to be found to satisfy the requirements of Rule 49.10 of the Rules of Civil Procedure. In fact, in Rooney (Litigation Guardian of) v. Graham,[^24] Laskin J.A. held that an offer that provided for enhanced costs on a solicitor client or substantial indemnity basis satisfied the requirements of Rule 49.10. Laskin J.A. held that the purpose of Rule 49 is to encourage parties to make reasonable offers to settle and to facilitate the early settlement of litigation. This purpose would be undermined if the Rule did not encompass offers providing for ongoing enhanced costs, since this might reduce the incentive to make otherwise reasonable offers to settle.

[70] In my view, the use of Rule 18(14) should be facilitated and encouraged rather than frustrated or undermined. Provided that an offer to settle does not predetermine the costs award, and merely provides for costs “as agreed or as determined by the court”, I see no reason why such an offer should automatically be deemed to be non-compliant with the subrule. Since Craig obtained a substantive result as favourable as his January 23, 2017 offer at trial, and his offer otherwise met the requirements of the subrule, I find that the offer complies with Rule 18(14).

[71] That said, even if an offer satisfies the requirements of Rule 18 (14), there is no automatic right to full cost recovery. The court retains a residual discretion not to award full recovery costs, as reflected in the proviso to Rule 18 (14), “unless the court orders otherwise”. Ultimately the court must make an award of costs that is fair and reasonable in the circumstances, a matter I will return to in the Conclusions section below.

D. Considerations of Proportionality

[72] As discussed earlier, the assessment of costs is not a mechanical exercise. Costs must be proportional to the amount in issue and the outcome. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case rather than an amount fixed by the actual costs incurred by the successful litigant.

[73] Victoria takes the position that the costs claimed by Craig are excessive and unreasonable, and out of all proportion to the matters at issue in the litigation. She notes that Craig’s legal fees claimed for Fielding 2014, a two-week trial that involved more legal issues, was approximately $400,000 (inclusive of HST but not disbursements or experts). In contrast, Craig’s claim for legal fees for the most recent two-week trial is just under $500,000, even though there were fewer substantive issues. Moreover, the legal fees claimed do not include the net amount of costs previously claimed for the motion before Backhouse J., as well as other related motions. If these fees are taken into account, the fees being claimed total approximately $600,000.

[74] Victoria also argues that it is appropriate to consider and compare the costs expended by both parties. Her Bill of Costs discloses that she incurred legal fees of $370,000, approximately $130,000 less than Craig. Victoria points out that Craig utilized two partners and one associate lawyer, whereas Victoria used the services of one partner and two associates (one senior and one junior). Victoria argues that she should not be expected to pay for what she characterizes as an excessive use of legal resources. She also argues that even though Craig’s counsel had significantly less experience than did hers, the hourly rates charged by both sets of counsel were broadly similar.

[75] In considering the issue of proportionality, I begin with the observation that in my view the issues in this proceeding were important and complex. The importance of the issues at stake is reflected in the fact that Victoria was willing to settle her claims only if Craig paid her a lump-sum of $1.5 million net. Acceptance of this offer would have imposed an onerous financial obligation on Craig at a time when he was nearing the end of his working career. Moreover, although Victoria did not expressly plead fraud, in substance her claims regarding Craig’s unreported cash income amounted to an allegation of fraud, which clearly implicates important issues of reputation.

[76] It is true that certain of the legal issues that were considered by Mesbur J. in Fielding 2014 were not at issue in this litigation and, in this sense, there may have been fewer issues in dispute here than in Fielding 2014. That said, the issues raised in this proceeding were numerous and legally complex. In particular, the income report prepared by Victoria’s expert Mozessohn argued that significant income should be imputed to Craig based on a variety of provisions in s. 19 of the CSG. These claims required a close analysis of the relevant provisions of the CSG, including the manner in which the provisions had been interpreted by courts in the past. The legal complexity of the various arguments surrounding imputation of income is reflected in the fact that the analysis of these claims occupied over 40 paragraphs in my reasons. In addition, although Mozessohn’s attempt to impute income based on the “unexplained deposits” identified in his 91-page Scope Limitation was not legally complex, it required extensive due diligence by Craig’s counsel, as well as his financial expert Ranot.

[77] I find that Craig did not devote excessive legal resources to this litigation. He has submitted a Bill of Costs which provides detailed dockets for the time spent by his counsel, broken down by the different stages of the litigation. It discloses that approximately 75% of Craig’s legal fees were incurred in trial preparation in May 2018 as well as during the two weeks of trial itself. This is unsurprising given the late breaking and extensive disclosure requests made by Mozessohn in April and May 2018, as well as the late delivery of Mozessohn’s complex and detailed income report just 10 days prior to trial. Moreover, because Mozessohn shifted his position in the course of the trial, it was necessary for Craig’s counsel to respond “in real time” by undertaking additional analysis and due diligence during the trial itself. I therefore find that it was reasonable for Craig to involve a third lawyer in the period leading up to and during the trial in order to undertake the work that was clearly required in order to respond to the numerous claims and allegations being put forward by Victoria at the 11th hour of the litigation.

[78] In any event, I would observe that Victoria’s assertion that she spent less in legal fees than did Craig ignores the hundreds of thousands of dollars that Victoria spent on her experts. As pointed out by Craig in his cost submissions, once legal fees and disbursements are accounted for, Victoria spent a total of approximately $725,000 on the litigation, which is about $45,000 more than did Craig. As for the argument that Craig’s costs for this trial were much higher than in Fielding 2014, the same can be said of Victoria since her costs for this trial (taking into account disbursements and HST), were themselves more than $250,000 above what she spent in Fielding 2014. Nor do I find that Craig’s costs claim should be discounted by the fact that his counsel may have had fewer years of experience than did Victoria’s counsel, since the hourly rates charged by both sets of lawyers were almost identical.

[79] Victoria also argues that, while she expected that the legal fees would be in the six figure range, she was not expecting that they would be as high as they were. Yet Victoria had already been ordered to pay Craig $345,000 for the parenting trial, $210,000 for Fielding 2014 (an award which had been discounted due to Craig’s unsatisfactory disclosure in that proceeding), $50,000 for her unsuccessful appeal of both prior trial decisions, and $75,000 for the disclosure motion before Backhouse J. This amounted to over $680,000 in legal costs. Given these previous costs awards, as well as the amounts she herself spent on this litigation, I do not think she should have been taken by surprise at the amount of costs claimed by Craig.

[80] I echo the comments of Gray J. in Cimmaster v. Piccione[^25] to the effect that a party who has chosen to raise numerous serious allegations which are ultimately determined to be unfounded cannot then complain about the resources that were found necessary in order to rebut the claims. As Gray J. noted:

The concept of proportionality should not normally result in reduced costs where the unsuccessful party has forced a long and expensive trial. It is cold comfort to the successful party, who has been forced to expend many thousands of dollars and many days and hours fighting a claim that is ultimately defeated, only to be told that it should obtain a reduced amount of costs based on some notional concept of proportionality.

[81] These comments aptly described the circumstances of the present case. Victoria chose to advance numerous complex and significant claims, virtually all of which involved matters that had recently been correctly determined by Mesbur J. of this court in Fielding 2014. Victoria was willing to spend hundreds of thousands of dollars to reopen and pursue these claims, and forced Craig to do likewise. In the circumstances, I do not accept Victoria’s submission that Craig’s costs were excessive or disproportionate to the matters at issue and, accordingly, would not discount or reduce his costs on this basis.

VI: Conclusions

[82] Taking into account all the circumstances of this litigation, including Craig’s overall success combined with Victoria’s unreasonable conduct, in my view Craig is entitled to a costs order over and above what he would have received on a partial indemnity scale. The question that remains to consider is whether, as a result of his January 24, 2017 offer, or any other relevant factor, he is entitled to full recovery of his costs on the basis of Rule 18(14), or whether the appropriate costs award should fall somewhere between partial indemnity and full recovery.

[83] As discussed above, because Craig obtained results at trial that were as favourable as those set out in his January 24, 2017 offer, the offer satisfies the requirements of Rule 18(14). Nevertheless, it is important to recognize that his offer only dealt with certain specific claims that had been advanced by Victoria. Craig simply invited Victoria to abandon those claims. Even if she had done so, this would not have settled the primary issue that became the focus of this proceeding, namely, the determination of Craig’s income for support purposes. Moreover, Craig’s offer did not involve any genuine compromise of his claims. He merely proposed to have Victoria abandon a number of her claims, while continuing to pursue his own. Nor is it an easy or straightforward matter to separate out the costs attributable to the specific claims identified in Craig’s January 24, 2017 offer, from the costs of the litigation generally.

[84] An additional factor that is relevant to Craig’s entitlement to full recovery costs based on his January 24, 2017 offer is Victoria’s financial circumstances. Victoria is over 60 years old, is no longer working, and her disability pension will terminate when she is 65. Victoria has indicated that a full recovery costs order as sought by Craig would negatively affect her ability to provide for Sean and Natalie, which the Court of Appeal has found to be an appropriate consideration in the exercise of discretion under Rule 18 (14).[^26]

[85] In light of these considerations, I regard this as an exceptional case in which I should exercise the discretion contemplated by Rule 18(14), and decline to order full recovery costs against Victoria, despite Craig’s January 24, 2017 offer.

[86] Nor do I find any other juridical reason that would justify an award of full recovery costs. Although I have found Victoria’s conduct to be unreasonable, it was not in bad faith. As such, I conclude that a fair and reasonable costs award in this case should fall somewhere between partial indemnity and full recovery.

[87] Accordingly, I fix the costs payable by Victoria to Craig at $500,000, inclusive of disbursements and HST. I would set off against this costs award the $23,582 in support arrears which I found payable by Craig to Victoria. This results in a net amount payable by Victoria to Craig of $476,418, which I order payable by May 3, 2019.

[88] Craig also asks that I order these costs enforceable as support, pursuant to s. 1(1)(g) of the Family Responsibility and Support Arrears Enforcement Act 1996.[^27] Craig argues that granting this relief will ensure that he does not have to incur even more legal fees to try and collect the costs award, and will ensure that Victoria cannot try to avoid having to pay costs to Craig by making an assignment in bankruptcy.

[89] Section 1 of the FRSAEA provides in relevant part as follows:

“support order” means a provision in an order made in or outside of Ontario and enforceable in Ontario for the payment of money as support or maintenance, and includes a provision for,

(g) interest or the payment of legal fees or other expenses arising in relation to support or maintenance…

[90] I am unclear as to whether it is open to me to designate a costs order in favour of Craig as spousal support for purposes of the FRSAEA. Only where legal fees “aris[e] in relation to support or maintenance” is it open to the court to designate such fees as support. But because there is no support order in favour of Craig,[^28] the legal fees payable by Victoria to Craig do not relate to, or flow from, any underlying order for support or maintenance. Since Craig is a payor and not a recipient of support, it is difficult to see how a costs order in his favour can be characterized as relating or ancillary to support or maintenance. This interpretation of “support order” seems consistent with the overall purpose of the FRSAEA, which is to provide a scheme for the enforcement of support obligations of payors, as well as the support entitlements of recipients. Designating the costs order in favour of Craig as “support” could mean that the Director of FRO would be required to reduce the child or spousal support otherwise payable to Victoria, which seems at odds with this overall statutory purpose.

[91] On the other hand, in Clark v. Clark, the Court of Appeal determined that in any proceeding in which child and spousal support were central issues, it is open to the court to designate the resulting costs order to be enforceable as “support” in accordance with s. 1(1)(g) of the FRSAEA.[^29] In Clark, Cronk J.A. concluded there was “no authority for the contention that where a child support claim is dismissed, costs incurred in respect of that claim cannot form part of a support order enforceable by the FRO.” It should be observed, however, that Clark did not deal with a situation such as the present case, where a support payor is seeking to have costs in his favour enforced by the Director as against a recipient of child support.

[92] Even assuming it is open to me to designate the support order in this proceeding as support, I would decline to do so. As Victoria points out that there have been four significant costs awards to date totaling almost $700,000 and she has made all of these payments. She maintains that there is no evidence to suggest that she will not pay a further costs award. Nor is there any evidence supporting the suggestion that she may declare bankruptcy in order to avoid the obligation to satisfy this costs award. I would further note that in the event Victoria fails to comply with this costs order, in any further proceedings she would be subject to Rule 1(8), which grants the court authority to, inter alia, strike out any application, answer, motion to change, or any other document filed by a party who has failed to comply with a court order.

[93] Therefore, I do not believe this is an appropriate case in which to order that costs be enforceable as support and I would decline to make the order sought by Craig.

VII: Order to Go

[94] Craig is entitled to his costs, which I fix at $500,000, inclusive of HST and disbursements. Victoria is entitled to set off against this amount the $23,582 in support arrears payable to her by Craig. In the result, I order that Victoria pay Craig $476,418 by May 3, 2019.

P. J. Monahan J.

Released: February 4, 2019.

[^1]: Fielding v. Fielding, 2018 ONSC 5659 ("Reasons"). [^2]: Fielding v. Fielding, 2014 ONSC 2272 ("Fielding 2014"). [^3]: Serra v. Serra, 2009 ONCA 395 at paragraph 8. [^4]: 2018 ONCA 867 ("Mattina") at paragraph 10. [^5]: Berta v. Berta, 2015 ONCA 918 at paragraph 94. [^6]: Mattina at paragraph 13. [^7]: Rule 24(4). [^8]: Rule 24(8). [^9]: Rule 18(14) & (16). [^10]: 2018 ONCA 840 at paragraphs 12 and 19. [^11]: Boucher v. Public Accountants Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 O. R. (3rd) 291 (Ont. C.A.) at paragraph 24. [^12]: Beaver v. Hill, at paragraph 13. [^13]: See the January 25, 2018 Endorsement of Backhouse J., granting Craig's request that he be permitted to cross-examine the three chartered business valuators, and awarding Craig $6000 in costs. Backhouse J. ordered the cross examination of Victoria's three chartered business valuators to take place on February 1, 2018. However, for reasons not disclosed in this proceeding, those cross examinations never proceeded and, instead, Victoria's chartered business valuators withdrew from this case. [^14]: This correspondence is described in more detail in paragraph 21 below. [^15]: Pursuant to a trial management schedule set by Horkins J. in December 2017, Victoria had been ordered to produce her expert report by April 10, 2018. At the commencement of the trial, Victoria moved for leave to extend the time for the filing of her expert income report, and this request was granted. [^16]: 2018 ONSC 4762 at paragraphs 12 and 16. [^17]: See discussion at paragraphs 65 to 72 below. [^18]: See discussion at paragraph 23 above. [^19]: It should be noted that Victoria also relied on an affidavit that had been prepared by Craig's office manager which had acknowledged that Craig received cash income through his practice. However, this affidavit had been considered by Backhouse J., who noted that the office manager had stated with 100% certainty that there had never been a time when Craig had received a cash payment that had not been documented in the books and records of the practice. Backhouse J did not regard the affidavit from the office manager as justifying the disclosure request, and in my reasons I similarly found that the affidavit did not give rise to a concern over unreported cash income. [^20]: Berta v. Berta, 2015 ONCA 918 at paragraph 96. [^21]: 2007 CanLII 20279 (ON SC), [2007] O.J. No. 2164 (Ont. S. C. J.), affirmed 2010 ONCA 196, [2010] O.J. No. 1064 (Ont. C. A.). [^22]: 2016 ONSC 6232 at paragraphs 45 to 48. [^23]: See Chomos v. Hamilton, at paragraphs 24 to 29. [^24]: 2001 CanLII 24064 (ON CA), 53 OR (3d) 685 (C.A.); 198 DLR (4th) 1 [^25]: 2010 ONSC 846 at paragraph 19. [^26]: M. (A. C.) v. M. (D.) (2003), 2003 CanLII 18880 (ON CA), 67 O. R. (3rd) 181 (C.A.), at paragraph 43. [^27]: S. O. 1996, c. 31 ("FRSAEA"). [^28]: The parties’ support obligation in relation to Katie terminated on April 30, 2018. [^29]: Clark v. Clark, 2014 ONCA 175 at paragraph 79.