Court File and Parties
Court File No.: FC-16-288-0 Heard: 2020/01/16 Superior Court of Justice - Ontario
Re: Norine Hum – Applicant v. Dianne (David) Skoll - Respondent
Before: Madam Justice Maria Linhares de Sousa
Counsel: D. Larry Segal, for the Applicant J. Alison Campbell, for the Respondent
Heard: By Written Submissions on Costs
Costs Endorsement
[1] In this matter the Applicant seeks an order for total full indemnity costs of $578,388.22, inclusive of HST and disbursements against the Respondent. The Respondent seeks an order for partial indemnity costs of $150,000, inclusive of HST and disbursements against the Applicant.
[2] There is no question that this case was a complex matter due to substantial contingent and underlying issues of corporate interests, control, evaluations and finances and complicated real income determinations. Appropriate experts greatly assisted with these issues in the course of the trial and led to substantial agreement on them. Despite the contingent and underlying issues, the substantial and principal legal issues of custody and access, child and spousal support and property division which arose in this case for determination by the Court were relatively simple and should have been predictable. Clearly the dynamic of the parties’ relationship got in the way of a complete resolution of this case without a trial.
[3] The substantial and important issues of custody and access were, happily, resolved by the parties prior to trial, but of course not before substantial legal fees and expert fees were incurred by the parties in arriving at their final agreement. This is borne out by the long and detailed parenting agreement reached by the parties.
[4] The parties agreed that all time and legal costs spent in arriving at their final parenting agreement was not to be the subject of this cost order. The parties cannot agree on the percentage of legal time this is to include. The Applicant maintains that it is 25% and the Respondent claims that it is more like 50% of the costs incurred prior to the execution of the parenting agreement in May of 2018.
[5] It is to be noted that the fundamental parenting arrangement, without precise details, finally agreed to by the parties had been in place since February or March of 2015. The parties seemed to deal on their own with issues that arose from time to time from their ad hoc parenting arrangement.
[6] Furthermore, by the time the action was started, and the parties’ respective counsel were involved in February and March, 2016, it is fair to say that the lawyers were concentrating their efforts on issues of financial disclosure, property dispositions and child and spousal support, culminating in the motion heard by Master Champagne, resulting in her consent order of June 18, 2016. In November, 2016, this was followed by the contested support motion before Justice James, resulting in the consent order for interim spousal and child support, dated November 15, 2016, which governed the parties until trial. The parties further agreed that there would be no costs of the motion and cross-motion before Justice James.
[7] Determination of this question, namely, what percentage of fees should be deducted because it related to the legal issues of custody and access, cannot be done by way of a mathematical exercise nor is it a fine science. Given the dynamics between the parties revealed by the evidence presented at trial and the high conflict demonstrated in this case, a deduction of $100,000 to $125,000 of legal fees would be consistent with the parties’ agreement not to include in a cost order the legal fees relating to the issues of custody and access.
[8] That leaves the three major issues of income determination, child and spousal support, and property division with sundry other minor property issues to be dealt with in this costs order. There is no question that the majority of trial time was spent on these issues. With respect to the issue of income determination, that issue was not seriously contested as both parties substantially relied on the opinion of the experts and had filed substantial documentation to deal with this issue.
[9] In addition, happily, the parties were able to agree on a substantial amount of sundry and underlying property and financial issues as evidenced by their joint Net Family Property Statement, filed as exhibit # 47 at trial, which greatly assisted the Court in arriving at its final decision on the real legal issues before the Court.
[10] Furthermore, after a last appearance before the Court on October 31, 2019, post-judgment before me to deal with some outstanding issues preventing the filing of a final order approved as to form and content, those outstanding issues were also resolved between the parties. A final order, approved as to form and content was finally signed by me on January 13, 2020.
[11] Upon considering the nature of the major legal issues before the Court at trial and the determination of those issues as reflected in my judgment, I must come to the conclusion that the Applicant was substantially, although not completely, successful on the issues of child and spousal support and property division.
[12] More precisely, the Applicant was successful in obtaining an order for both retroactive (going back to shortly after separation) and prospective child support in accordance with the Child Support Guidelines, quite frankly something that should have been obvious to everyone and immediately implemented, post separation. I also note that this issue was never seriously contested at trial but was delayed in its implementation until the consent order of Justice James in November of 2016.
[13] The Applicant was successful on the identification of section 7 expenses for the remaining child. Nonetheless, neither party were successful on the question of retroactive section 7 expenses.
[14] Of equal importance, if not more, the Applicant was not completely successful on the question of income determination for the Respondent, post the sale of the Roaring Penquin although she was successful in having included in the Respondent’s income determination some anticipated investment income, which was also hotly contested by the Respondent, who was very determined to exclusively enjoy her substantial proceeds from the sale of the Roaring Penquin.
[15] The Applicant was equally successful in obtaining an order for both retroactive (again going back to shortly after the separation) and indefinite and unconditional (subject to a material change of circumstances) prospective spousal support in accordance with the Spousal Support Advisory Guidelines, mid range. This seemed to be a hotly contested issue between the parties. This too, in my view, should have been obvious and predictable, as entitlement and duration were also not in serious contention, and should have been implemented in some form long before the consent order of Justice James, almost two years after the separation.
[16] With respect to property division, there is no question that the Applicant was substantially successful on the question of the unequal division of net family property. However, she did not succeed on the very contentious issue, which occupied much trial time, of whether there had been a reckless depletion of assets by the sale of Roaring Penquin. She, therefore, received an order for an unequal division of net family property for the reasons given in my judgment but did not obtain as high an award as she argued at trial and which would have been justified by such a finding.
[17] While the Applicant’s success on the substantial issues entitles her, presumptively, to an order of costs, pursuant to Rule 24(1) of the Family Law Rules, O. Reg. 114/99 the divided success on some of the issues, as described above, will clearly have an effect on the quantum of costs which would be fair in the circumstances. I was not given any reason on the evidence to consider a denial of the Applicant’s presumptive order of costs based on her unreasonable conduct in the litigation.
[18] A party’s unreasonable behavior during the course of the litigation is a factor to consider in making an order of costs, pursuant to Rule 24(4) of the Family Law Rules as is the factor of bad faith on the part of a party to the litigation (Rule 24(8) of the Family Law Rules). Rule 24(8) mandates that if a party is found to have acted in bad faith, the Court is to award “full recovery” costs on an immediate basis. Nonetheless, it is not disputed that ultimately this decision is also within the overall discretion of the Court depending on the individual circumstances of the case (See Beaver v. Hill, 2018 ONSC 3352).
[19] Mutual allegations of bad faith have been made throughout the course of this litigation. Nonetheless, after a careful consideration of all of the evidence, I come to the conclusion that neither party can be found to have acted in bad faith in this matter.
[20] As pointed out in case law presented by both counsel in their written submissions on cost, the finding of bad faith on the part of a litigant demands a high threshold. (See C.S. (Applicant) and M.S. (Respondent), 2007 ONCJ 209). In order to come within the meaning of bad faith in Rule 24(8) the,
“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 at stake in the case or to deceive the other party or the court…The requisite intent to harm, conceal 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 behavior is causing the other party major financial harm without justification.” (See para. 17 of CS v. MS, supra).
[21] In substantial subsequent case law, following the above decision, the requisite intention to inflict harm on the other party must be present to meet the high threshold test of bad faith. I cannot make that finding on the facts of this case which to me is determinative of the issue.
[22] On the facts I found that the Respondent’s intention for concealing the sale of Roaring Penguin from the Applicant was her concern for a potential interference by the Applicant with the sale of Roaring Penquin which was being carried out for legitimate and beneficial economic and financial reasons, from which, I might add, both parties ultimately benefited. I must conclude that these circumstances do not justify a finding of bad faith, despite the Respondent’s clear deception to the Applicant prior to the completion of the sale. Once completed, it was almost immediately disclosed.
[23] Despite the above, one can still be critical, as I have been in my Reasons for Judgment, for the deceptive behavior on the part of the Respondent, concerning the sale of her business, especially since other options were available to address the Respondent’s concern regarding sharing the information about the pending sale of her business with the Applicant and her counsel. There is no question that the manner in which the sale was carried out, prolonged the litigation and intensified the high conflict between the parties. It raised understandable suspicions about motive because of the of the integral and significant role of the business in family economics and finances; it caused a late amendment to the trial pleadings leading to the raising of new legal issues, justifiably so on the part of the Applicant’s counsel, and a new issue that, I might reasonably conclude, added substantial trial time to the trial. As a result, there were serious consequences impacting the Applicant’s legal fees and it was not long after the amendment of the pleadings that the Respondent can be taken to have been fully aware of this impact. Finally, it put the Respondent in breach of her family law disclosure obligations which are always necessarily required to be complete and candid. For all of these reasons, the conduct of the Respondent can be found to have been extremely unreasonable in the conduct of the litigation, which must have a bearing on any costs awards. It would, in my view, at a minimum, rule out any award of costs being made in favour of the Respondent in this matter.
[24] Rule 24(5) of the Family Law Rules, in the context of assessing the reasonableness or unreasonableness of parties’ conduct, focuses consideration of any offers to settle made by the parties in the course of the litigation and their respective responses to those offers to settle. In the course of this litigation both parties made numerous offers to settle in an attempt to resolve their differences and to avoid a trial.
[25] As the material before the Court indicates, the Applicant made formal offers to settle on the following dates, and all of the Applicant’s offers were made acceptable in whole or in part:
March 14, 2017 (including custody and access issues), December 19, 2017 (including custody and access issues), May 11, 2018 (including custody and access issues),
[26] On October 26, 2018, the Applicant revoked all of the above outstanding offers to settle, presumably upon knowledge of the undisclosed sale of Roaring Penguin and to amend the pleadings. The Applicant delivered a final offer to settle, dated January 19, 2019 (on property, support and related issues only after the amendment of the pleadings).
[27] The Respondent presented offers to settle on the following dates, which were not made acceptable in part,
July 19, 2016 (including custody and access issues), January 26, 2017 (including custody and access issues), January 18, 2019 (on property, support and related issues only after the amendment of the pleadings), and on, March 1, 2019 (on property, support and related issues) post trial.
[28] Upon a careful examination of all of these offers to settle, I conclude the following. All of the offers to settle made by the parties can be considered a genuine attempt on the part of the respect parties to settle the issues between them and hence can be found to be reasonable. In the final analysis, however, none of the offers to settle, made by either party, necessarily triggers, in my view, the operation of Rule 18 (14). It is clear that the early offers to settle made by the parties were made without the benefit of full financial disclosure because Mr. Desnoyers’ complete expert evaluations of the parties’ business holdings and the available income to the Respondent from Roaring Penquin were not available to the parties until shortly before the first date of trial was set in the matter in May of 2018.
[29] My final decision on the question of support, retroactive and prospective, and my decision on the unequal division of net family property cannot be said to be as favourable or more favourable than any of the latter offers to settle made by the two parties. I find the Applicant was overreaching on the questions of retroactive child and spousal support, income determination and the property division. For her part, the Respondent allowed her blindness to the reality of the issues of retroactive spousal and child support and her real income determination, inclusive of her future investment income, lead her to under reach and fall short of a significant threshhold, when making offers to settle on these issues.
[30] With respect to the question of whether this cost award should include previous steps in the case prior to the trial before me, an issue that has been raised by both counsel in their submissions, I conclude that I am not prohibited from making such an order of costs at this stage, except as the parties have otherwise agreed as mentioned earlier. In my view this is within the discretion of the Court upon a consideration of all of the circumstances and clearly is not prohibited by Rule 24 (11) of the Family Law Rules. In the early stages of this litigation there were numerous interim court proceedings, whose significance to the overall litigation, could not have been known to the parties until much later. I am convinced of one clear fact and that is that only the initiation of court proceedings, commenced by the Applicant in 2016, substantially provided this case with the necessary thrust to dislodge it from the longstanding inappropriate financial arrangements the family had been stuck in since their separation.
[31] Rule 24 (12) of the Family Law Rules provides additional factors to take into account in setting the amount of a costs award. They are a consideration of the following, the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues.
[32] This was an important case, particularly to the parties. The resolution of some of the rather complex issues of business and corporate holdings evaluations, the real earning potential of the parties were important to the future wellbeing of all of the members of this family unit. There was the need for substantial and thorough financial disclosure including the assistance of experts. It is not surprising that bringing this matter to trial took some time as well as the continuous services of the legal officers involved. It would be expected that in a case of this kind there would be substantial legal fees. This was clearly known to both parties as the case took some 3 years to get to trial after the commencement of the litigation.
[33] In these reasons I have already addressed the parties’ behavior and need not repeat myself here.
[34] The time spent by each party, I have also addressed this issue.
[35] I have also already addressed the issue of the parties’ offers to settle.
[36] Any legal fees, including the number of lawyers and their rates. Issues of excessiveness have been raised by counsel for the Respondent in her submissions. Both counsel have filed their respective overall bills of costs for the court’s consideration. The expertise of the respective leading counsels on the matter and their hourly rates were not seriously challenged. I am not prepared to second guess either counsel’s hourly allotment of legal work in this complicated matter. Interestingly enough, both bills of costs, when considered as a whole from commencement of the litigation leading to the acceptance as to form and content of the final order were not substantially different.
[37] Any expert witness fees, including the number of experts and their rates. In essence my order provided, in accordance with the agreement of the parties, that all expert fees would be shared equally and have been taken account of in the signed final order.
[38] Any other expense properly paid or payable. This factor usually entails a consideration of a party’s ability to pay costs. In this case given the magnitude of assets shared by both parties both parties are well able to pay costs.
[39] The purposeful principles of a costs award are clear and well stated in the case of Serra v. Serra, 2009 ONCA 395. They are threefold, namely, to partially indemnify successful litigants for the cost of the litigation, to encourage settlement, and, to discourage and sanction inappropriate behavior by litigants. All three of these principles apply to the facts of this case.
[40] Finally, it is also accepted that determining the quantum of costs is not a mere mathematical exercise of legal hours multiplied by a legal rate. A costs award, except in those rarest of cases, is not meant to reimburse a litigant for every dollar spent on legal fees. The award of costs must be fixed in a fair and reasonable manner for the unsuccessful party who is found to be fully aware of the anticipated quantum of costs he or she could pay if unsuccessful on the litigation (See Boucher et al v. Public Accountants Council for the Province of Ontario). I have no question in my mind that both parties conducted this litigation to trial fully aware and cognisant of the legal costs and potential costs of their conflict.
[41] For all of the reasons enunciated above, namely, the substantial success of the Applicant on the major legal issues in this matter, the divided success on a number of the underlying and sundry issues, a consideration of the parties’ respective offers to settle through out the litigation, the unreasonable behavior found on the part of the Respondent and its impact on the duration and cost of the litigation, the complexity and importance of the issues, the scope of the legal fees involved in this matter, and finally the parties’ ability to pay costs, I order the Respondent to pay to the Applicant her costs that I fix the amount of $350,000, including HST and disbursements. Costs are payable within 60 days from the date of this order.
Madam Justice Maria Linhares de Sousa Date: January 16, 2020