Court File and Parties

Court File No.: 41901/19 Date: 2020-06-08 Superior Court of Justice - Ontario

Re: Marianna CUMMINGS, Applicant And: Mark Andrew CUMMINGS, Respondent

Before: Kurz J.

Counsel: Kathryn L. Smithen, for the Applicant Harold Niman/Christopher Mamo, for the Respondent

Heard: in writing

Endorsement

1. On May 15, 2020, I released my decision on the attempted ex-parte motion of the Applicant (“Marianna”), found at 2020 ONSC 3093. Conlan J. had earlier ruled that it must be served on the Respondent (“Mark”). I found that only part of Marianna’s motion is urgent. I granted some of the relief claimed, to preserve a property that Mark owns (“the property”), secure a potential 2019 employment bonus that may be owing to Mark by his former employer, and to allow Marianna to inspect the property in Mark's absence. I also ordered certain financial disclosure, which included documentation related to the refinancing of the property, the potential bonus, Mark’s litigation against his former employer and any employment that Mark obtains. However, I dismissed the remainder of the relief without prejudice to the right to request it in the future when more normal operations of this court resume.

2. I found that Mark had breached the order of Gray J. of March 21, 2019 by surreptitiously refinancing the mortgages registered against the property, thereby increasing the debt owing against it. The Gray J. order clearly enjoined Mark from further encumbering or selling the property without the consent of Marianna or a further court order. He obtained neither.

3. I also found that the motion “… may well have been avoided or its scope lessened had Mark advised Marianna of his intention to refinance the property and had Marianna contacted Mark, through counsel, once she discovered the refinancing.” I found that much of Marianna’s supposition about what Mark had done with the proceeds of his refinancing, that he had effectively absconded with about $4.2 million, was incorrect. But, “[t]hat being said, Mark's original decision to violate the Gray J. order set in place the chain of events of this motion.”

4. Marianna seeks her full indemnity costs of the motion, fixed at $20,361.76. She principally argues that by breaching the Gray J. order, Mark acted in bad faith. She accordingly seeks her full indemnity costs. She also argues that Mark took advantage of her precarious financial position.

5. Mark’s contends that no costs should be awarded. He argues that:

a. Success was divided in that, in Mark’s telling, Marianna received relief on only two of the 17 (11 substantive) heads of relief included in her amended notice of motion. In particular, she did not receive a wide Mareva injunction, or much of the broad disclosure that she requested. I also did not order Mark to present himself for service of a contempt motion (a head of relief which was actually withdrawn during the course of argument and which was barely touched upon in the materials).

b. Marianna’s conduct in bringing this motion without even having her counsel confer with Mark’s counsel was unreasonable. Had she done that, she would have realized that the premise of her motion, that Mark had pocketed about $4.2 million dollars in mortgage money in order to defeat her claims, was not accurate.

c. After Marianna brought this motion, Mark was willing to agree to a preservation order upon the same terms as those contained in the interim-interim order of Conlan J., without the argument of this motion;

d. Mark did not realize that his refinancing of the mortgage violated the Gray J. order.

6. In determining what amount, if any, of costs it would be fair, reasonable and proportionate for Mark to pay to Marianna in this motion, I must consider the interplay between:

a. the divided success in this case;

b. Mark’s breach of a court order; and

c. Marianna’s overreach in bringing this motion;

7. In considering each of these factors, I find that Mark should pay Marianna costs of this motion, fixed at $15,000 but payable upon delayed terms as set out blow.

Jurisdiction to Award Costs

8. The jurisdiction of this court to award costs arises from s. 131 of the Courts of Justice Act. That provision gives the court broad discretion to determine costs.

General Costs Principles

13. As the Ontario Court of Appeal noted in Serra v. Serra, 2009 ONCA 105, [2009] O.J. No. 432 (O.C.A.), at para. 8:

Modern costs rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.

14. In Shute v. Shute, [2017] O.J. No. 4110, Justice Victoria Starr of the Ontario Court of Justice supplements Serra’s three costs purposes by offering a fourth which apply in family law proceedings: ensuring that the primary objective of the Family Law Rules (“FLR”), dealing with cases justly, is met. Starr J. wrote:

29 Subrule 2(2) of the Rules adds a fourth fundamental purpose for costs: to ensure that the primary objective of the Rules is met -- that cases are dealt with justly. This provision needs to be read in conjunction with Rule 24 of the Rules. Subrule 2(4) of the Rules states that parties have a positive obligation to help the court to promote the primary objective under the Rules. Clauses 2(3)(a) and (b) of the Rules set out that dealing with a case justly includes ensuring that the procedure is fair to all parties and saving time and expense. [See: Sambasivam v. Pulendrarajah, 2012 ONCJ 711].

8. In Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (O.C.A.) (“Boucher”), at para. 24 the Ontario Court of Appeal stated that costs awards should reflect "what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties."

De-Emphasis on Counsel's Hourly Rates and Time Spent

9. In Delellis v. Delellis and Delellis, 2005 36447 (ON SC), [2005] O.J. No. 4345 (S.C.J.), Justice David Aston of this court noted the emphasis on setting a "fair and reasonable" amount of costs that emerges from Boucher and the cases following it. Aston J. found that this approach has led to a de-emphasis on hourly rates and time spent by counsel as the key factor in fixing costs. He continued at para. 9:

...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. [Citations omitted]

10. In Beaver v. Hill, 2018 ONCA 840 at para. 10, the Ontario Court of Appeal clarified that proportionality and reasonableness, the two key factors set out in r. 24(12)(a), are the touchstone considerations to be applied in fixing the amount of costs in family law matters.

Scale of Costs

11. In deciding costs in family law proceedings, judges are not constrained by the normal scale of costs found in the Rules of Civil Procedure. The court may increase or decrease what would ordinarily be an appropriate amount of costs based on the behaviour of the parties and the presence of absence of offers to settle. (Beaver v. Hill at para. 9).

Party Status does not Grant a License to Litigate Oblivious to the Consequences

12. The right to bring or respond to a case does not grant either party a license to litigate in a manner that ignores the consequence of that litigation. Justice Carole Curtis of the Ontario Court of Justice emphasized this point in Sabo v. Sabo, [2013] O.J. No. 4628 (O.C.J.), as follows at para. 38:

Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly for the purposes of this case, oblivious to the mounting costs of the litigation...

Rule 24 Factors

13. FLR Rule 24 sets out the factors that the court must consider in the exercise of its discretion regarding costs. However the court retains its ultimate discretion to determine what costs are reasonable (C.A.M. v. D.M., 2003 18880 (Ont. C.A.) at para. 43).

14. The starting point, found in r. 24(1) is that the successful party is presumptively entitled to the costs of a motion, enforcement, case or appeal (see also Beaver v. Hill and Berta v. Berta, 2015 ONCA 918). But as Rosenberg J.A. stated in C.A.M. v. D.M., at para. 41, that provision does not completely remove the court’s discretion to refuse to grant costs to the successful party. Further, as the Ontario Court of Appeal stated in Beaver v. Hill, there is no presumption that the successful party in a family law proceeding is entitled to an amount approaching full or even substantial indemnity costs. The exceptions to that principle are bad faith (r. 24(8)) or besting an offer to settle (r. 18(14)) (see paras. 11 and 13).

15. Further, under r. 24(6), if success in a step in a case is divided, the court may apportion costs as appropriate.

16. Subrule 24(12) sets out the appropriate considerations in fixing the quantum of costs. It reads:

17. 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.

17. Under r. 24(5), when the court looks to the reasonableness or unreasonableness of each party’s behaviour during the course of the dispute, the following considerations apply:

a. the party's behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;

b. the reasonableness of any offer the party made; and

c. any offer the party withdrew or failed to accept.

18. While the successful party is presumptively entitled to costs, under R. 24 (6) the court has the discretion to determine the allocation of costs when there is divided success.

19. Under r. 24(8), full indemnity costs are available when a party has been found to have acted in bad faith. That provision states that “[i]f a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately.”

20. That being said, any costs decision must be in accord with the underlying principles of proportionality and reasonableness (see C.A.M. v. D.M., at para. 41). Further, any application of r. 24(8) must apply to the part of the proceeding in which the party has acted in bad faith. If a party has acted in bad faith in regard to part of a proceeding, the imposition of full indemnity costs may apply to that part or all of the proceeding, as the facts may bear out.

How is Success Measured?

13. In Jackson v. Mayerle, 2016 ONSC 1556 (SCJ-FC), Pazaratz J. of this court’s Family Court looked at how to apportion divided success under r. 24(6). He stated that r. 24(6) requires a comparative analysis as most family cases have multiple issues. However, those issues are not equally important, time-consuming or expensive to determine. Comparative success can also be assessed globally in relation to the whole of the case, asking:

i. How many issues were there?

ii. How did the issues compare in terms of importance, complexity and time expended?

iii. Was either party predominantly successful on more of the issues?

iv. Was either party more responsible for unnecessary legal costs being incurred?

14. As Chappel J., also of this court’s Family Court, pointed out in Thompson v. Drummond, 2018 ONSC 4762, citing a number of authorities, the determination of success is not a simple mathematical exercise. “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…” The court can then award costs to the party who is more successful on an overall global basis or the primary issue, subject to any necessary adjustments in regard to lack of success on other issues and other costs factors.

15. There is some disagreement in the case law about the role of offers to settle in the determination of relative success, but that discussion is not relevant in this case as no written offers were exchanged.

Bad Faith

16. In order to meet the definition of bad faith in r. 24(8), a litigant's conduct must fall far below the standard expected of parties to a proceeding. The misbehaviour must be deliberate and intended to harm, conceal or deceive. In S.(C) v. S.(C), 2007 20279 (ON SC), [2007] O.J. No. 2164 (S.C.J.), Perkins, J. offered a thorough description of the behaviour required to meet the definition of the term, bad faith, as follows:

In order to come within the meaning of bad faith in subrule 24(8), behaviour 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 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.

17. Deliberate disobedience of a court order can be bad faith if that disobedience is intended to achieve an ulterior motive (Fatahi-Ghandehari v. Wilson, [2018] O.J. No. 460 at par. 39) or inflict financial harm (S.(C) v. S.(C), 2007 20279 (ON SC), [2007] O.J. No. 2164 (S.C.J.)).

18. As Pazaratz J. wrote in Jackson v. Mayerle, 2016 ONSC 1556: "...Rule 24(8) requires a fairly high threshold of egregious behaviour, and as such a finding of bad faith is rarely made." Pazaratz J. was careful to distinguish bad faith from bad judgment, negligence, or unreasonable behaviour. Bad faith requires some element of conscious wrongdoing. As Pazaratz J. put it at paras. 58-59:

Bad faith is not synonymous with bad judgment or negligence. Rather, it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction or obfuscation...

There is a difference between bad faith and unreasonable behaviour. The essence of bad faith is when a person suggests their actions are aimed for one purpose when they are aimed for another purpose. It is done knowingly and intentionally. The court can determine costs at a far higher level than those that there shall be full indemnity for only the piece of the litigation where bad faith was demonstrated.

Application of Legal Principles to Facts of this Case

19. In considering the principles and findings set out above, I can conclude that:

20. Success was divided in this motion. However Marianna was the more successful party. She obtained an order that protected her from Mark again acting in a manner prohibited by Gray J. She also obtained an order requiring greater disclosure from Mark than he was willing to concede was necessary.

21. Nonetheless, before the argument of this motion., Mark had already conceded his willingness to consent to a preservation order similar to the one that I ultimately granted.

22. Mark’s breach of Gray J.’s order amounted to bad faith. My analysis of the issue of bad faith is set out below.

23. Both parties acted unreasonably in some measure in this motion;

24. Ultimately, Marianna is entitled to her costs of this motion. I grant her an amount is fair, reasonable and proportionate in the circumstances, but which does not amount to full indemnity for all of the motion.

I have more to say about each point below.

Divided Success

20. As set out above, Marianna did not receive all of the relief that she sought. Particularly, she failed to obtain a broad Mareva injunction and the third party disclosure that she sought. In fact, much of the disclosure that I ordered was not the disclosure that she requested. She abandoned her attempt to bring a contempt motion and require Mark to attend for service of that motion.

21. Nevertheless, Marianna was successful in obtaining a preservation order and substantial disclosure from Mark. Had she not brought this motion, she would not have obtained that order. All in all, Marianna was the more successful party in this motion.

Mark Conceded his Willingness to Consent to a Preservation Order

22. After Conlan J. granted his interim-interim preservation order, Mark indicated that he would agree to the continuation of such an order. Instead, he argued that the wide-ranging Mareva injunction Marianna sought was disproportionate to the harm and risk that she raised. Marianna persisted. I agreed with mark on that point. That is a factor that goes towards both success and the determination of the reasonableness of each party’s conduct.

Bad Faith and the Breach of the Gray J. Order

23. Marianna’s key costs argument is that Mark not only acted in breach of the Gray order, but that he acted in bad faith. Accordingly, she insists that I must punish him with a full indemnity costs award for the entire motion, whatever the degree of success.

24. Mark denied in his affidavit that he breached Gray J.’s order. Following the release of my decision. he no longer makes that denial in his costs submission. Rather, he argues that he “genuinely believed that he was obeying Justice Gray’s order…” That argument is simply not believable. As I previously found, the Gray J. order was clear about what was required of Mark. It simply states:

The Respondent shall not further encumber or sell the property without the consent of the Applicant or an order of the Court.

25. Mark points to no ambiguity in that term that could have misled him. He is an obviously intelligent man. Until recently, he was the head of a financial services company. One of his counsel of record is generally regarded as one of the best family law lawyers in this province. I do not believe that Mark’s family law lawyers could have advised him that he was entitled to engage in the refinancing without consent from Marianna or the court.

26. For those reasons, Mark’s claim that he felt that he was entitled, under the Gray J. order, to surreptitiously add about $1 million to the mortgages on the property is not credible. I reject that claim.

27. I add that if Mark truly believed that he was entitled to refinance the property in the manner that he did, he would still have been required to advise Marianna. His duty to provide an updated financial statement in the face of the refinancing arises under r. 13(15), which read as follows:

Duty to Correct, update documents

(15) As soon as a party discovers that a document that he or she has served under this rule is incorrect, incomplete or out of date, the party shall serve on the other party and, if applicable, file, a corrected, updated or new document, as the circumstances require.

28. That means that he would have been required to serve a new financial statement on Marianna as soon as he completed his refinancing transactions. Needless to say, he failed to do that.

29. The only available conclusion is that Mark intended, in the words of Perkins J. in S.(C) v. S.(C), “…to conceal information relevant to the issues or to deceive the other party or the court.” He may have tried to convince himself that what he was doing was for the benefit of his family; but if so, he could only do so by being willfully blind to the effect of what he was doing. As I stated in my endorsement on the motion, he decided that it was better to seek forgiveness than permission.

30. Had Mark sought permission of the court, he may have been given leave to make the transactions, particularly in the face of his job loss. But even if that were to occur, he would not have been allowed to remove about $177,000 in equity from the property to use as he pleased.

31. This was not simply unreasonable behaviour by Mark. It was, in Pazaratz J.’s words in Jackson v. Mayerle, “…intentional duplicity, obstruction or obfuscation…”

32. I add that even in the face of my bad faith finding, my costs award must still fit within the Beaver v Hill criteria of fair, reasonable and proportional. Here, despite whatever my findings about bad faith, Marianna is not entitled to full indemnity costs of this entire motion because of the divided success and her role in this motion, which I briefly discuss below.

Both Parties acted Unreasonably in some Measure in this Motion

33. As I stated in my previous endorsement and above, this motion could have been avoided had each party acted more reasonably. In addition to his bad faith in regard to the refinancing, Mark should have disclosed the transaction, even after he completed it. On the other hand, had Marianna and her counsel contacted Mark’s counsel before bringing their motion, they may have been able to save everyone involved in this motion some time and money. That is particularly the case as Mark did not abscond with $4.2 million, as Marianna feared. Much of the relief that Marianna sought was disproportionate to the harm caused by Mark’s conduct.

34. Marianna attempted to amend her motion to seek third party disclosure without leave. I refused to consider that request. Before she withdrew it, Marianna sought relief in regard to Mark presenting himself for personal service of a contempt motion in the absence of legal authority.

35. In addition, neither party made a written offer to settle under r. 18(14). In J.V.M. v. F.D.P., 2011 ONCJ 616, [2011] O.J. No. 5441 (O.C.J.), Sherr J. of the Ontario Court of Justice equated the failure to make an offer to settle to unreasonable behaviour under r. 24(4), (5)(b) and (c), and 24(12)((iii). He stated at para. 5:

The failure to make an offer to settle much earlier [than trial] by either party is unreasonable behaviour. Subrule 2(4) imposes a duty on parties and their lawyers to promote the primary objective of the rules to deal with cases justly (subrule 2(2)). This includes taking appropriate steps to save time and expense (subrule 2(3)). Offers to settle play an important role in saving time and expense by promoting settlements, focusing parties and often narrowing issues in dispute. See Laing v. Mahmoud, 2011 ONSC 6737, [2011] O.J. No. 5134, 2011 CarswellOnt 12972 (Ont. Fam. Ct.). The failure to serve an offer to settle will be an adverse factor when assessing costs.

Marianna is Entitled to Costs of $15,000, Payable when Mark is Able

36. At the end of the day, Marianna is entitled to her costs of the motion because of Mark’s bad faith, the fact that she was more successful than not, and the fact that his conduct made the motion necessary. But her entitlement must be leavened with the fact that she was not entirely successful and the fact that she too acted unreasonably as set out above.

37. I note that Mark’s full indemnity costs are $18,075.53, meaning that Ms. Smithen’s bill of costs of $20,361.76 is within the scope of Mark’s reasonable expectations.

38. Having reviewed both sets of costs submissions as well as both bills of costs, I find that costs of $15,000 are fair reasonable and proportionate in the circumstances. Mark shall pay that amount to Marianna.

39. I would ordinarily order Mark to pay that amount forthwith, but he is presently unemployed. Instead, he shall pay that amount to Marianna at the earliest of:

40. The resolution of his wrongful dismissal claim, with payment to be made from the net proceeds of that claim;

41. The sale of the property located at 1110 Morrison Heights Drive, Oakville, with payment to be made from the net proceeds of that sale;

42. Sixty days of Mark obtaining new employment.

Endorsement Deemed an Order

40. In the circumstances of the COVID-19 emergency, this endorsement is deemed to be an Order of the Court. It is operative and enforceable from the time of its release, without any need for a signed or entered, formal, typed Order. The parties may submit a formal Order for signing and entry once the court re-opens.

“Marvin Kurz J.”

Electronic signature of Justice Marvin Kurz,

Dated: June 8, 2020 Original will be placed in court file