Superior Court of Justice - Ontario

RE: Miranda Beth Hill, Applicant

AND:

Ken Charles Gregory, Respondent

BEFORE: Sanfilippo J.

COUNSEL: Michael J. Stangarone and Meghann Melito, for the Applicant

Jason Gottlieb, for the Respondent

HEARD: In Writing – Endorsement Released February 5, 2019

ENDORSEMENT ON COSTS

Overview

[1] By decision rendered on November 15, 2018, I granted the Applicant’s Motion, in part, by staying the Respondent’s Motion to Change until the Respondent satisfies the Court of his compliance with certain terms imposed on him by prior Court Orders: 2018 ONSC 6847.

[2] In paragraph 76 of my Endorsement, I encouraged the parties to discuss and agree on the issue of costs. In the event that they were not able to reach agreement, I provided them with a timetable and framework for the delivery to me of written submissions on the issue of costs.

[3] The parties were not able to agree on the issue of costs, with the result that they delivered written cost submissions, pursuant to an extension of time that the parties consented to, and I approved, for this process to complete.

[4] For the reasons that follow, I have determined that the Respondent shall pay the Applicant costs in the amount of $10,000.00, all-inclusive.

I. BACKGROUND TO THE COST SUBMISSIONS

[5] The Applicant, Miranda Beth Hill, brought an Application against the Respondent, Ken Charles Gregory, that was determined by a Final Order issued by Paisley J. on May 26, 2017. On April 4, 2018, the Respondent filed a Motion to Change the Final Order. In the time between the rendering of the Final Order and the filing of the Motion to Change, the Director of the Family Responsibility Office (“FRO”) commenced enforcement proceedings against the Respondent for enforcement of substantial arrears owed by him to the Applicant in support payments, costs and interim disbursements that were subject to a Support Deduction Order (“SDO”), totaling in excess of $97,000.00. In a Default Hearing conducted in the enforcement proceeding in January 2018, Pawagi J. issued a Temporary Default Order requiring the Respondent to make monthly payments to the Applicant for current and past spousal support.

[6] The Applicant brought this motion to dismiss or to stay the Respondent’s Motion to Change, and various other relief (“Applicant’s Motion”).

[7] I granted the Applicant’s Motion, in part. I stayed the Respondent’s Motion to Change until the Respondent complies with those terms of the Court Orders that are outstanding and were not addressed by the Temporary Default Order. I dismissed as premature the Applicant’s Motion to summarily dismiss the Motion to Change, without prejudice to its reinstatement once the Respondent complies with the terms of the stay, and I dismissed as moot the Applicant’s motion for security for costs.

II. THE PARTIES’ POSITIONS ON THE ISSUE OF COSTS

The Applicant’s Position

[8] The Applicant seeks an order that she is entitled to costs of the Applicant’s Motion on the ground that she was successful and thereby presumptively entitled to costs.

[9] In terms of quantification of the costs, the Applicant contends that she is entitled to costs on a full recovery basis on two grounds:

a) The conduct of the Respondent was in bad faith, and;

b) She obtained a result that was as favourable or more favourable than an offer to settle that she delivered in accordance with Rule 18 of the Family Law Rules, O. Reg. 114/99 (the “Applicant’s OTS”).

[10] The Applicant also seeks costs of a case conference conducted before a Dispute Resolution Officer on July 17, 2018 (the “DRO Case Conference”), on a substantial cost basis. The costs of the DRO Case Conference were reserved to be determined at the Applicant’s Motion.

[11] The Applicant has submitted two Bills of Costs:

a) A Bill of Costs for the DRO Case Conference that involved 12.8 hours of lawyers’ time and 3.6 hours of law clerk’s time for a total, including disbursements and applicable taxes, of $6,869.56 on a full indemnity basis, $5,531.87 on a substantial indemnity basis and $4,194.17 on a partial indemnity basis;

b) A Bill of Costs for the Applicant’s Motion that involves 40.8 hours of lawyers’ time and 15.5 hours of law clerk’s time for a total, including disbursements and applicable taxes, of $21,436.36 on a full indemnity basis, $17,528.49 on a substantial indemnity basis and $13,260.61 on a partial indemnity basis.

[12] The Applicant seeks costs in the amount of $28,000.00, inclusive of lawyer’s fees, disbursements and taxes. This consists of costs of the Applicant’s Motion on a full indemnity basis ($21,436.36), costs of the DRO Case Conference on a substantial indemnity basis ($5,531.87) and costs of $1,500 in the preparation of these cost submissions, rounded.

The Respondent’s Position

[13] The Respondent concedes that the Applicant was the successful party on the Applicant’s Motion and is thereby entitled to an award of costs.

[14] The Respondent submits that the cost award should be in the amount of $8,000, all-inclusive of lawyer’s fees, disbursements and taxes, on the following grounds:

a) The Applicant’s success was only on the issue of the stay while the remaining areas of relief sought by the Applicant were dismissed. As such, the Respondent contends that the Applicant realized only partial success, and that the cost award should reflect this;

b) The Applicant did not obtain an order more favourable than the Applicant’s OTS;

c) No costs should be awarded of the DRO Case Conference;

d) The amount of costs sought by the Applicant is excessive in the scale of costs sought, in the amount of time said to have been incurred, in the hourly rates charged, and in disbursements. As a result, the Respondent contends that the costs sought by the Applicant are not fair, reasonable and proportionate.

[15] With entitlement to costs of the Applicant’s Motion conceded, my task is to determine the amount of costs that the Applicant should be awarded payable by the Respondent.

III. ANALYSIS

A. Applicable Principles

[16] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides the Court with discretion in the determination of both entitlement to costs and quantification of costs. The exercise of discretion in family law cases is guided by the Family Law Rules.

[17] In Serra v. Serra, 2009 ONCA 395, 66 R.F.L. (6th) 40, the Court of Appeal confirmed that the law of costs in family law cases is designed to foster three important costs principles: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behaviour by litigants: see also, Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330 (C.A.). In Mattina v. Mattina, 2018 ONCA 867 at para. 10, the Court of Appeal stated that Family Law Rule 2(2) adds a fourth factor: to ensure that cases are dealt with justly.

[18] Where costs are awarded, as here, the overarching objective is to determine a cost quantification that is fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); Selznick v. Selznick, 2013 ONCA 35. This is beyond the mechanical, arithmetic computation of the legal fees incurred, as was emphasized by the Court of Appeal in Zesta Engineering Ltd. v. Cloutier (2002), 2002 CanLII 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.) at para. 4: “[i]n our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.”

[19] As a final element of a cost assessment, I must ensure that the cost award is proportional and reasonable. In Beaver v. Hill, 2018 ONCA 840 at para. 12, Nordheimer J.A. stated that “proportionality and reasonableness are the touchstone considerations to be applied in fixing the amount of costs.” This statement was made in direct reference to Family Law Rule 24(12)(a), which provides that in quantifying costs, the Court shall consider each factor in a manner to ensure reasonableness and proportionality.

B. Partial Success

[20] Family Law Rule 24(6) states: “If success in a step in a case is divided, the court may apportion costs as appropriate.”

[21] The Applicant’s Motion sought myriad relief:

a) An Order “summarily dismissing and/or staying” the Respondent’s Motion to Change;

b) An Order finding that the Respondent was in breach of six Court Orders;

c) An Order for the posting of security for costs;

d) An Order for the payment of spousal support;

e) An Order for financial disclosure and expert evidence;

f) An Order effecting the transfer of the Respondent’s share in Solid Source Tire & Wheel Inc.;

g) An Order for ongoing and retroactive increased periodic spousal support and compensatory lump sum spousal support;

h) An Order for interim disbursements in the amount of $50,000 for legal fees and to obtain business valuation.

[22] By presenting such a broad-based inventory of relief sought on a single motion, the Applicant was destined not to obtain certain of the relief sought. Seeking both a stay of the Motion to Change and its summary dismissal on its merits was redundant. The Applicant established that the Respondent should not be heard on his Motion to Change until he complied with the terms of the Final Order that are not addressed by the Temporary Default Order, and other outstanding Orders. This meant that the Applicant’s motion for summary dismissal could not proceed.

[23] Similarly, the Applicant’s contention that the Respondent should be ordered to pay security for costs and interim disbursements presumed that the Respondent’s Motion to Change would be heard on its merits, as opposed to being stayed.

[24] The incompatibility of the relief sought by the Applicant’s Motion was identified at the hearing. The argument was structured to, first, marshal submissions on the issue of the stay, understanding that success on this issue would cause other elements of the Applicant’s Motion to be dismissed as premature or moot.

[25] I find that the Applicant had partial success on her Motion. As such, I will reduce the Applicant’s cost quantification to reflect an apportionment between the successful elements of the Applicant’s Motion and those that were unsuccessful, in accordance with Family Law Rule 24(6).

C. The Applicant’s Offer to Settle

[26] Family Law Rule 18(14) outlines the cost consequences to an unsuccessful party where the successful party has delivered an offer to settle (“OTS”) that satisfies the requirements of that Rule.

[27] The Applicant delivered her OTS “at least one day before the motion date”, although barely so. The Respondent contends that the Applicant’s OTS was delivered “exactly 25 hours and 31 minutes before the commencement of the Motion”. Although minimally so, this is compliant with Family Law Rule 18(14)(1). Also, the Applicant’s OTS did not expire and was not withdrawn before the commencement of the hearing, and was also not accepted, thereby satisfying the requirements of Family Law Rules 18(14)(3) and (4).

[28] In such circumstances, the Applicant has a basis on which to contend that she is entitled to “costs to the date the offer was served and full recovery of costs from that date” provided that she obtained “an order that is as favourable or more favourable than the offer”, according to Rule 18(14)(5).

[29] I have analysed whether the Applicant achieved a result on her Motion that is “as favourable as or more favourable” than her OTS and find that she did not. The Applicant’s OTS proposed that the Respondent pay 50% of the amount that remains outstanding from the previous Court Orders and is not subject to enforcement by FRO. In this single regard, her OTS is more favourable than paragraph 75(a)(i) of my Endorsement, wherein I order that the Respondent pay 100% of this amount in order to proceed with his Motion to Change. However, the Applicant’s OTS also required the Respondent to agree to jointly retain and fund a business valuator to complete an expert analysis of the Respondent’s income and of his business interests for the period 2015 to 2018, as an added condition to the adjournment of the remainder of the Applicant’s Motion. This further term of the Applicant’s OTS was, by paragraph 5 of the Applicant’s OTS, not severable from the remainder of the offer. The Applicant did not achieve this relief on her Motion.

[30] I agree with the statement by Pazaratz J. in Chomos v Hamilton, 2016 ONSC 6232, 82 R.F.L. (7th) 395 that: “The court is not required to examine each term of the offer as compared to the terms of the order and weigh with microscopic precision the equivalence of the terms. What is required is a general assessment of the overall comparability of the offer as contrasted with the order.” Using this analysis, the Applicant failed to establish that she is entitled to rely on Family Law Rule 18(14). The funding of the business valuator sought by the Applicant’s OTS constitutes, effectively, an interim disbursement related to the adjudication of the Respondent’s Motion to Change, which I stayed. I have concluded that the Applicant’s OTS does not give rise to an entitlement to costs on a full recovery basis.

D. The Argument for Elevated Costs Based on Bad Faith

[31] The Applicant contends that the Respondent’s conduct in responding to the Applicant’s Motion amounts to bad faith and that I should thereby decide costs on a full recovery basis, in accordance with Family Law Rule 24(8). The Applicant bases her claim for costs on a full recovery basis on two grounds: first, my finding that the Respondent was non-compliant with all Orders rendered, including the Final Order and the DRO consent Order; and second, the Respondent’s failure to comply with the timetable established for the argument of the Applicant’s Motion.

[32] The Respondent’s written submissions do not directly respond to the Applicant’s claim for costs on a full recovery basis due to bad faith on the part of the Respondent, other than the general submission that the costs sought are excessive and ought to be on a partial indemnity basis.

[33] In Hendry v. Martins, [2001] O.J. No. 1098 (S.C.J.) at para. 4, Campbell J. stated that bad faith involves “…the conscious doing of a wrong because of a dishonest purpose or moral obliquity.” In S.(C.) v. S.(M.) (2007), 2007 CanLII 20279 (ON SC), 38 R.F.L. (6th) 315 (Ont. S.C.J.) at paras. 16-18, Perkins J. commented that “in order to come within the meaning of bad faith in subrule 24(8), behavior must be shown to be carried out with intent to inflict financial or emotional harm on the other party or other persons affected by the behavior, to conceal information relevant to the issues or to deceive the other party or the court.” In Chomos at para. 45, Pazaratz J. stated that “bad faith involves intentional duplicity, obstruction or obfuscation.”

[34] Most importantly to my present analysis, however, is that the assessment of whether costs should be assessed on a full recovery basis by reason of bad faith takes into account only the step in the litigation for which the costs are sought: Chomos, at para. 46, citing Stewart v. McKeown, 2012 ONCJ 644; M. (F.D.) v. W. (K.O.), 2015 ONCJ 94, 58 R.F.L. (7th) 497.

[35] The Respondent’s failure to comply with past Orders was taken into consideration in my determination that the Respondent’s Motion to Change will be stayed pending compliance with the terms that I have identified. This conduct cannot, in my view, be used as the basis for the Applicant’s submission that the Respondent acted in bad faith in his response to the Applicant’s Motion. This is the step for which costs must be assessed, and it is the Respondent’s conduct in responding to this step that is material.

[36] The only element of bad faith identified by the Applicant in the Respondent’s response to the motion is the late filing of materials. While this breach of the timetable cannot be condoned, it does not constitute bad faith for the purposes of Family Law Rule 24(8).

E. The Costs of the DRO Case Conference

[37] The Applicant seeks costs of the DRO Case Conference on the submission that the Respondent failed to provide disclosure in advance of the Case Conference, which in her submission contributed to it being unproductive. The Respondent also did not comply with the disclosure that was required by the Order rendered on consent arising from that attendance.

[38] The costs of the case conference were reserved to be determined at the Applicant’s Motion. However, in order for the Applicant to establish an entitlement to costs of the Case Conference, the Applicant must prove that the Respondent “was not prepared, did not serve the required documents, did not make any required disclosure, otherwise contributed to the conference being unproductive or otherwise did not follow these rules”: Family Law Rule 17(18).

[39] The endorsement rendered further to the DRO Case Conference shows that the parties were able to address substantive issues and opinions, as well as to schedule the Applicant’s Motion through implementation of a timetable and agree to a consent Order. The Applicant has not established that the Respondent breached any of his requirements to serve and file a conference brief and financial statement or to otherwise participate in the Case Conference as required by the Family Law Rules.

[40] The Applicant’s claim for costs of the DRO Case Conference is dismissed.

F. Quantification of Costs

[41] Family Law Rule 24(12) sets out the factors that a court shall consider in setting the amount of costs. These include the importance or complexity of the issues, the lawyer’s rates, the time spent and the expenses paid or payable. As stated earlier, the court shall also ensure reasonableness, fairness and proportionality in the cost assessment.

[42] I have decided to assess the Applicant’s costs on the Applicant’s Motion on a partial indemnity basis. These total $13,260.61, all-inclusive of fees, disbursements and taxes. As stated, I dismiss the Applicant’s claim for costs of the DRO Case Conference and dismiss the Applicant’s claim for $1,500 in costs for delivery of costs submissions, finding that each party shall bear their expense of submitting written cost submissions.

[43] I find that the hourly rates used by the Applicant in its calculation of partial indemnity costs are reasonable. I also find that the number of hours incurred are reasonable, in the circumstances. I agree with the finding by Nordheimer J., as he then was, that it is not “the role of the court to second-guess the time spent by counsel unless it is manifestly unreasonable”, and the amount of hours spent here are not: Basdeo v. University Health Network, [2002] O.J. No. 597 (S.C.J.) at para. 7.

[44] I will reduce the amount of the Applicant’s partial recovery fees to reflect the partial success. As such, I reduce the partial indemnity costs demanded of $13,260.61, all-inclusive, to $10,000.00, all-inclusive. I award the Applicant costs in the amount of $10,000.00, all-inclusive, payable by the Respondent.

IV. DISPOSITION

[45] Having considered all applicable principles, including those set out in Family Law Rules 18 and 24, and in the exercise of my discretion, including as set out in section 131 of the Courts of Justice Act, I have determined that it is fair, reasonable, just and proportionate to award the Applicant, Miranda Beth Hill, costs of the Applicant’s Motion in the amount of $10,000.00, all-inclusive, payable by the Respondent, Ken Charles Gregory.

Sanfilippo J.

Date: February 5, 2019