COURT FILE NO.: FS-16-87387-00 DATE: 2020 04 21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
YUAN YUAN GUO Applicant Poroshad Mahdi, for the Applicant
- and -
JIAN LI, DONGHUI LI and YU YUN ZHANG Respondents Douglas Beamish, for Respondent Jian Li
HEARD: In Writing
COSTS ENDORSMENT
L. SHAW J.
Overview
[1] A trial in this matter was heard over an eight-day period between January 7 and 16, 2019. The central issue in dispute was the custody and access arrangements for the two children of the marriage. Although the bulk of the evidence focused on the parenting arrangements for the children, the following issues were also in dispute:
a. Some minor property issues;
b. Payment for retroactive s. 7 expenses for the children;
c. Retroactive and ongoing spousal support;
d. The applicant’s claim for occupation rent; and
e. The respondent’s claim for credit for payments made to maintain the jointly-owned matrimonial home.
[2] On May 1, 2019, I released my Reasons for Judgment (see Guo v. Li, Li, and Zhang, 2019 ONSC 2726) and made the following orders:
The applicant shall have sole custody of the two children with specified parenting arrangements granted to the respondent whereby the children would be with him almost 50% of the time (see para. 205 of my Reasons for Judgment for further details).
The respondent owed the applicant an equalization payment of $44,503.58, plus pre-judgment interest.
The respondent owed the applicant occupation rent in the sum of $15,750. However, the applicant owed the respondent $13,653.48 for her share of the carrying costs for the matrimonial home, and therefore the net amount that the respondent owed the applicant for occupation rent was $2,096.52.
The parties agreed that the respondent owed the applicant retroactive child support of $6,442.28.
The respondent shall pay to the applicant $1,606 per month in ongoing child support.
The respondent owed the applicant $2,913.66 for retroactive s. 7 expenses.
The applicant was not entitled to spousal support.
[3] Based on my ruling regarding parenting, I invited the parties to make further written submissions regarding the quantum of child support and the application of s. 9 of the Federal Child Support Guidelines, SOR/97-175 (the “Guidelines”). Based upon those further written submissions, I found that the respondent should pay child ongoing monthly support of $1,000 per month effective May 1, 2019.
[4] I also requested written submissions from the parties regarding costs, which I received in March 2020. For the following reasons, I find that there should be no order as to costs.
Position of the Parties
[5] The applicant’s position is that the respondent should pay $125,000 of her costs. She did not specify if this was inclusive of disbursements and H.S.T., so I presume it was. According to the Bill of Costs filed by the applicant, her total legal fees were $173,361.92. She was given a 25% courtesy discount by her lawyer, resulting in net fees of $132,745.24. The disbursements totalled $5,985.63.
[6] Although the applicant did not state what scale of costs she was seeking, based on the net amount of fees she incurred, it appears that the request is for costs on a substantial indemnity basis. The applicant’s position is that based on the offers to settle exchanged, she was mostly successful and did better or almost as well as the offers she served. Accordingly, she submits that pursuant to r. 24(1) of the Family Law Rules, O. Reg. 114/99, she is entitled to her costs. Although not stated in her costs submissions, her position is also that the costs consequences in r. 18(14) of the Family Law Rules are invoked as a result of these offers.
[7] According to the Bill of Costs filed by the respondent, his total legal fees were $280,193.98, plus H.S.T. of $36,425.22, for a total of $316,619.20. His disbursements totalled $18,466.40, inclusive of H.S.T.
[8] The respondent’s position is that based on the offers exchanged, success was divided. Therefore, there should be no order as to costs pursuant to r. 24(6) of the Family Law Rules.
Analysis
[9] In determining costs, the starting point is s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended. Section 131 provides that subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, which may determine by whom and to what extent the costs shall be paid.
[10] In family law proceedings, costs awards are governed by r. 24 of the Family Law Rules which sets out a number of principles to guide the court in the exercise of its discretion. When considering the issue of costs and the principles set out in r. 24, the court must also be guided by the primary objective of the Family Law Rules which is to enable the court to deal with cases justly: r. 2(2).
[11] When fixing costs, I must also consider the reasonable expectations of the unsuccessful party. An unsuccessful party can reasonably expect to pay the successful party’s costs. However, I must determine whether the quantum of costs proposed by the applicant is excessive or within the reasonable contemplation of the unsuccessful party: Boucher v. Public Accountants Council for the Province of Ontario, 71 O.R. (3d) 291 (C.A.), at para. 38.
[12] In this matter, the respondent’s legal fees were significantly greater than what was incurred by the applicant. Accordingly, I find that the quantum of fees the applicant incurred, and the fees being sought are within the reasonable contemplation of the respondent.
[13] The primary issue in determining whether the applicant is entitled to costs and on what scale is an assessment of who was the successful party. In their written submissions, both parties focused on the offers exchanged and who was more successful than the other.
[14] The respondent asserts that success was divided and that each party should bear their own costs. In determining whether success was divided, I must not simply add up the number of issues and calculate which party won more of those issues. Rather, in cases where one party asserts that success was divided, a contextual analysis must be used that considers the importance of the issues that were litigated and the amount of time and expense devoted to those issues: Thompson v. Drummond, 2018 ONSC 4762, at para. 12.
[15] During the course of the trial, the parties reached an agreement on some issues. This included an agreement on the majority of carrying costs that the respondent had incurred for the matrimonial home, the quantum of retroactive child support, and the quantum of some, but not all, s. 7 expenses. The only property issue in dispute was the value of the respondent’s vehicle. The value of all other assets and debts was agreed upon by the parties.
[16] Although the parties were able to reach a negotiated resolution on some but not all of the issues, costs can still be ordered if the court determines that one party was more successful than the other party overall: Thompson, at para. 13.
[17] Pursuant to r. 24(12)(iii), when fixing the amount of costs, I can consider any offers to settle. In order to determine who was more successful, both the applicant and the respondent referred to a number of offers to settle that were exchanged prior to trial. The parties also provided copies of offers made in connection with prior motions. While those offers are not relevant to the issue of success in accordance with r. 18(14), they are a factor I can consider pursuant to r. 24(12) of the Family Law Rules. In my view, prior offers can be of assistance in considering the overall conduct of the litigation. Furthermore, when considering r. 24(5) and the reasonable conduct of the parties, I can also consider the reasonableness of any offer made.
[18] The applicant referred to nine prior offers to settle. The applicant’s offers were somewhat confusing. On February 16, 2018, she made five separate offers dealing with various issues separately. There were then subsequent offers that dealt with some of the same issues. It is not clear why one comprehensive offer was not served. The offers to settle were dated October 5, 2016 (offer to settle a motion), June 1, 2017 (offer to settle a motion regarding the matrimonial home), February 16, 2018 (five separate offers), April 25, 2018, June 18, 2018 (offer to settle a motion), and December 31, 2018.
[19] In his material, the respondent referred to two offers dated May 4, 2018 and December 28, 2018 (three separate offers).
[20] Given the number of offers and the repetition in some of them, I will use a contextual approach to review each contested issue in order to determine if success can be determined.
i) Custody and Access
[21] The trial lasted eight days. The bulk of that time was hearing evidence relating to the parenting arrangements for the children. All of the witnesses called by the parties dealt with the custody and access issues. Based on a review of my trial notes, approximately 75% of the evidence I heard related to the issues of custody and access.
[22] In my Reasons for Judgment, I granted the applicant sole custody of the children. The parenting schedule ordered resulted in a shared parenting arrangement with the respondent having the children with him almost 50% of the time. This was an expansion of the time the respondent had been spending with the children prior to trial.
[23] In the applicant’s offer to settle dated February 16, 2018, she proposed that the children would live primarily with her. Her offer was that she would consult with the respondent on all major issues, but that she would ultimately have the final decision. That offer was consistent with my Reasons regarding decision-making. Her offer was silent about custody. Her proposal for access was in accordance with the recommendations made in a report prepared by a social worker with the Office of the Children’s Lawyer (“OCL”) who testified at trial. That proposal was more limited than what I ordered.
[24] The applicant served another offer to settle dated June 18, 2018 regarding parenting time, which was the same as her offer of February 16, 2018. The June offer was silent regarding custody.
[25] The applicant served another offer on December 31, 2018. In that offer, she proposed that the primary residence of the children be with her and that the respondent’s parenting time be as per the recommendations of the OCL. That offer also included an offer for child support. The offer was not severable, meaning that the respondent could not only accept some of the terms. It was an “all or nothing” proposition.
[26] The applicant also referred to an offer to settle dated October 5, 2016 wherein she offered that there be no order as to custody and that the parties have equal time with the children. That offer was in connection to a motion heard at the time. In the applicant’s subsequent offers, her proposal for parenting was more restrictive than the shared arrangement she had proposed in the original offer.
[27] In the respondent’s offers to settle dated May 4, 2018 and December 28, 2018, he proposed that the parties have joint custody of the children and that the children spend equal amounts of time with the parties. The December 28, 2018 offer also included a term that neither party could travel outside of Canada without the prior written consent of the other party and that the respondent would hold the children’s passports. This offer to settle also dealt with all other issues in dispute including equalization and child and spousal support. The offer was not severable.
[28] The applicant referred to an offer that the respondent made dated October 5, 2016 in connection with the initial motion before the court regarding temporary custody. In that offer, the respondent proposed that there be no order as to custody but that the children’s primary residence would be with him. He proposed that the applicant have parenting time on alternating weekends and every Wednesday to Thursday.
[29] In my view, there is never a “successful” party when dealing with parenting issues. The only successful party should be the children. Using the idea of a “winner” and “loser” seems to be incongruous with the notion of determining what parenting arrangements are in the best interests of the children.
[30] Nonetheless, based on r. 24(1) of the Family Law Rules, the offers exchanged, and my decision, I find that there was mixed success on the custody and access issues, which involved the bulk of the time at trial. While the applicant was granted sole custody, ultimate decision-making authority, and did not require permission to travel with the children, the respondent was granted shared parenting time with the children.
ii) Child Support and Section 7 Expenses
[31] Based on the parenting arrangement, I found that the respondent owed the applicant ongoing child support of $1,000, which was less than the table amount provided in the Child Support Guidelines. The applicant’s offer of December 31, 2018 was for the table amount of support, which was $1,539 per month. The respondent’s offer of December 28, 2018 was for $601 per month, which was a set off-amount based on the proposed shared parenting arrangement.
[32] After I released my Reasons for Judgment, I invited further written submissions regarding ongoing monthly child support based on a shared parenting arrangement. The applicant maintained her position that the table amount of child support should be paid. The respondent’s proposal was for a set-off that was less than what was ordered.
[33] Neither party did better than their offers. Based on their respective offers and my decision, I find that that neither party was successful on the issue of ongoing child support.
[34] During the trial, the parties indicated that they had reached an agreement on retroactive child support and retroactive s. 7 expenses, save and except for the applicant’s request for a share of daycare expenses and the respondent’s request for payment of a gym membership.
[35] On those two issues, the applicant was successful as I found that the respondent was to pay his share of the daycare costs and that the gym membership was not a s. 7 expense.
iii) Spousal Support
[36] The applicant’s offer dated February 16, 2018 was that neither party would pay the other spousal support. In the respondent’s offers dated May 4, 2018, he also proposed no spousal support.
[37] Although there appeared to be an agreement on this issue, nonetheless, at trial, the applicant pursued her claim for spousal support. Ultimately, I made a finding that she was not entitled to spousal support.
[38] I note that both of the offers to settle the issue of spousal support were part of more a comprehensive offer in which the terms were not severable. While that may have prevented acceptance of individual terms of the offer, the parties ought to have recognized that there was an agreement on spousal support.
[39] It is not an efficient use of court, judicial or client resources to pursue a claim at trial when it is clear that the parties have reached an agreement. In this case, both parties offered to settle spousal support on the same terms, agreeing that no spousal support would be payable by either spouse. The parties ought to have been able to resolve that issue. As reflected in my Reasons for Judgment, I dealt with the issue of spousal support in a comprehensive manner in order to arrive at my decision that the applicant was not entitled to spousal support. During the trial, I had to request that the applicant’s counsel ask some additional questions of the applicant relating to her claim for spousal support as few questions were asked relating to that issue. Given the offers, in my view, the applicant ought to have indicated to the court at the commencement of trial that she was not pursuing spousal support.
iv) Equalization Payment
[40] In my Reasons for Judgment, I found that the respondent owed the applicant an equalization payment of $44,503.58.
[41] The applicant’s offer to settle dated February 16, 2018 was that the respondent pay the applicant an equalization payment of $47,461.96. The respondent’s offer dated December 28, 2018 was that he pay the applicant an equalization payment of $22,172. Although the applicant’s figure was significantly closer to my final order, neither party was more successful than their offer.
[42] At trial, the only issue in dispute was the value of the respondent’s vehicle. The applicant asserted that it had a value of $18,450 and the respondent’s position was that its value was $10,000. In the absence of cogent evidence supporting either position, I found its value to be in the mid-range.
[43] It is regrettable that the parties could not have reached an agreement regarding the value of the one asset in dispute. Furthermore, it is unfortunate that they could not have recognized that the legal fees they were incurring to contest that issue was completely disproportionate to the value of the asset.
v) Claim for Occupation Rent and Credit for Payments Made Towards the Matrimonial Home
[44] During the trial, I granted the respondent’s motion to amend his claim to include a claim for a credit for carrying costs to maintain the matrimonial home before he purchased the applicant’s interest. I also allowed the applicant to amend her claim to include a claim for occupation rent.
[45] Based on the evidence presented, I found that the respondent was entitled to a contribution from the applicant for the expenses incurred in maintaining the matrimonial home. The parties agreed on that figure, save and except for the contribution to utilities. I agreed with the applicant’s position in that regard. I also found that the applicant was successful in her claim for occupation rent. When the amounts owing were set-off, I found that the respondent owed the applicant $2,096.52
[46] Neither party made an offer regarding these issues prior to trial as the relief had not been requested in the pleadings. The respondent sought to amend his pleadings during the trial. When I agreed that he could advance this claim, the applicant then sought to advance a claim for occupation rent. Given that I granted the respondent’s request to amend his claim during the trial, I found that in order to be fair and reasonable, I must also grant the applicant’s request to amend her claim. I also permitted the applicant to call reply evidence regarding the market value for rent for a similar property.
[47] I note that these amendments ought to have been made prior to trial. Alternatively, the respondent ought to have informed the applicant, prior to trial, that he was seeking that relief. Trials by ambush is no longer acceptable. Both parties should be aware, prior to trial, what issues are being pursued and what have been resolved. Although the respondent indicated that the issue of carrying costs was addressed at a conference prior to trial, the applicant’s counsel was not aware of that as she was not counsel of record at the time. It would have been prudent for the respondent to have informed the applicant, prior to trial, that he would be seeking an amendment of his pleading at trial. Had he done that, the applicant could have been prepared to deal with the issue at trial rather than having to secure evidence to present during reply. The respondent’s approach was not an efficient use of resources.
[48] Ultimately, based on my finding on the amounts owed by each party, I find that the applicant was the more successful party on these issues.
[49] Based on the offers exchanged, if I was to just do a tally of each issue, I would find that the applicant was clearly more successful on the issues of custody, occupation rent, travel, and s. 7 expenses. The respondent was clearly more successful on the issue of parenting time, contribution for carrying costs, and spousal support. Regarding the issues of child support and the equalization payment, I find that there was mixed success or no success for either party.
[50] This type of tally, however, is not the approach to take when considering whether success was divided. By using a contextual approach, I conclude that there was divided success in this matter. That does not necessarily mean, however, that neither party is entitled to costs.
[51] Although there were a number of issues addressed at trial, the majority of the evidence presented by the witnesses called by both parties dealt with custody and access. That was the most important issue and took up most of the time at trial.
[52] In her submissions, the applicant asserted that the respondent disputed “every single minor issue” such as the value of the car. She also submits that the respondent extended the length of the trial by claiming a contribution for carrying costs. Although not explicitly stated, I infer that the applicant’s position is that the respondent’s conduct was not reasonable, which is a factor I should consider pursuant to r. 24(12) of the Family Law Rules.
[53] While I agree that those issues could have been dealt with in a more efficient manner, the applicant’s claim for spousal support was also one that she should have resolved prior to trial given the offers served. In my view, both parties could have adopted a more reasonable approach and resolved some of the more minor issues that required adjudication. Had the parties compromised on various issues, the focus of the trial could have then remained on the important issues of parenting of the children and child support, which would have limited the length of the trial.
[54] I must also comment on the legal fees incurred by the parties. The combined legal feels were approximately $490,000. It is very concerning to see that level of fees being incurred, particularly given the income earned by the parties. As indicated in my Reasons for Judgment, the parties moved to Canada in 2001. They have both achieved success in their educational and employment pursuits, have worked very hard and should be very proud of their achievements. I also commend both parties for being devoted to their children.
[55] However, at some point during this litigation, the parties should have recognized that the legal fees they were incurring were disproportionate to the issues in dispute. The amount of money spent on legal fees was money that the parties could have used for their personal benefit and for their children’s benefit.
Conclusion
[56] Using a contextual approach, and in consideration of the offers to settle and the factors set out in r. 24 of the Family Law Rules, I find that the success was divided. Therefore, there shall be no costs payable by either party.
L. Shaw J.
Released: April 21, 2020