Court File and Parties

COURT FILE NO.: 14-527 DATE: 20200717 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Natalie Burke Applicant – and – Shawn Poitras Respondent

Counsel: Judith Wilcox, counsel for the Applicant Self-Represented

WRITTEN SUBMISSIONS: June 18, 2020

Before: Lacelle, j.

REASONS FOR Decision on costs

Introduction

[1] The Applicant seeks costs on a full recovery basis following my ruling on an uncontested trial. My reasons for that ruling, and the procedural history of this matter, are set out in Burke v. Poitras, 2020 ONSC 3162. Accordingly, I will not review that information again here.

[2] The Applicant seeks costs relating to other steps in the litigation as well, including: costs in respect of settlement conferences (September 14, 2017 and May 17, 2018), as well as for motions relating to the preservation of the Respondent’s assets and addressing his trial participation rights (August 26, 2019). The costs relating to all of these events were reserved to the trial judge for determination.

[3] The total amount of the costs award sought is $217,229.25, including disbursements and HST. The Applicant seeks an order that these costs be enforceable by the Family Responsibility Office [“FRO”]. Alternatively, she seeks an award on a substantial indemnity basis for legal fees plus the costs of disbursements, which represents approximately 80% of the full recovery amount claimed for fees plus disbursements.

[4] The Applicant submits that she is entitled to costs on a full recovery basis as a result of i) the Respondent’s bad faith conduct; ii) her success on all claims and iii) beating her offer to settle. Should the court not be persuaded that costs on a full recovery basis are warranted, the Applicant submits that her alternative submission is supported because the Respondent has not behaved reasonably.

The governing principles

[5] Rule 24 of the Family Law Rules governs the court’s approach to awarding costs.

[6] Subrule 24(1) addresses entitlement to costs and sets out the presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.

[7] Subrule 24(12) provides that 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] Subrule 24(5) provides further direction as to how a court may determine whether a party’s behaviour has been unreasonable. It directs the court to examine the party’s behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle.

[9] Subrule 24(7) states that if a party does not appear at a step in the case, or appears but is not properly prepared to deal with the issues at that step or otherwise contributes to that step being unproductive, the court shall award costs against the party unless the court orders otherwise in the interests of justice.

[10] Subrule 24(8) holds that if 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. I will further discuss the meaning of “bad faith” momentarily.

[11] The importance of offers to settle, and the costs consequences associated with them, are further clarified in Rule 18. Subrule (14) provides that a party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if certain conditions are met. One of those conditions is that the party who makes the offer obtains an order that is as favourable or more favourable than the offer. Regardless, pursuant to subrule (16), when the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms, even if subrule (14) does not apply.

[12] Further guidance as to the factors applicable to the exercise of the court’s discretion in awarding costs is found in the jurisprudence. In Serra v. Serra, 2009 ONCA 395, [2009] O.J. No. 1905 (C.A.), the Court of Appeal for Ontario confirmed at para. 8 that “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”.

[13] These principles were more recently affirmed in Mattina v. Mattina, 2018 ONCA 867 at para. 10, which also confirms that

Rule 2(2) of the Family Law Rules adds a fourth fundamental purpose: to ensure that cases are dealt with justly: E.H. v. O.K., 2018 ONCJ 578 (Ont. C.J.), at para. 8; Sambasivam v. Pulendrarajah, 2012 ONCJ 711 (Ont. C.J.), at para. 37. And Rule 24(12), which sets out factors relevant to setting the amount of costs, specifically emphasizes "reasonableness and proportionality" in any costs award.

[14] Ultimately, the amount of any costs award is within the court’s discretion having regard to these Rules and principles.

Analysis and decision

[15] I am satisfied that it is reasonable, proportionate and fair that the Applicant be awarded costs on a full recovery basis and that, for the most part, they be enforceable by the Family Responsibility Office as she requests. I arrive at that conclusion after a consideration of a number of factors. I will discuss some of those considerations in more detail below.

[16] First, there is no doubt that the Applicant is entitled to costs. She was the successful party at trial. The real issue to be determined is the amount of those costs.

[17] In assessing what costs award is reasonable and proportionate, I consider the principles I have outlined above. I will discuss some of them in further detail.

The Respondent acted in bad faith

[18] Unreasonable conduct is not the same as bad faith conduct. In this case, I am satisfied that the Respondent has engaged in bad faith conduct.

[19] Before setting out the reasons for this finding, I include this helpful summary of the law on this issue which Desormeau J. provided in Belair v. Bourgon at paras. 38-40:

Rule 24(8) of the Family Law Rules states that if 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. Persistent refusal by a party to make accurate financial disclosure and reveal their true income may rise to the level of bad faith. See: DePace v. Michienzi (2000), 12 R.F.L. (5th) 341 (Ont. S.C.J.); Kardaras v. Kardaras, 2008 ONCJ 616 (Ont. C.J.). A bad faith finding on some specific issue does not necessarily have a spill-over effect to other issues. Hunt v. Hunt, [2001] O.J. No. 5111 (Ont. S.C.J.).

Rule 24(8) requires a fairly high threshold of egregious behaviour, and as such a finding of bad faith is rarely made. See: Cozzi v. Smith, 2015 ONSC 3626 (Ont. S.C.J.); Scipione v. Del Sordo, 2015 ONSC 5982 (Ont. S.C.J.). 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. See: S. (C.) v. S. (M.) (2007), 38 R.F.L. (6th) 315 (Ont. S.C.J.). 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. See: Scipione, supra.

Even where the "full recovery" provisions of the Rules are triggered -- either by an offer which meets Rule 18(14) requirements, or by a finding of bad faith -- quantification of costs still requires an overall sense of reasonableness and fairness. Goryn v. Neisner, 2015 ONCJ 318 (Ont. C.J.). The Rules do not require the court to allow the successful party to demand a blank cheque for their costs. Slongo v. Slongo, 2015 ONSC 3327 (Ont. S.C.J.). The court retains a residual discretion to make costs awards which are proportional, fair and reasonable in all the circumstances. M. (C.A.) v. M. (D.), [2003] O.J. No. 3707 (Ont. C.A.) (supra); Scipione v. Del Sordo, supra.; Jackson v. Mayerle, 2016 ONSC 1556 (Ont. S.C.J.).

[20] As I have said, I am satisfied that the Respondent acted in bad faith during the course of this case. He did not merely act unreasonably or exercise poor judgment during the litigation. I am satisfied that he intended that his conduct be harmful to the Applicant and/or obstructive to the court process necessary to resolve her claims. I am further satisfied that his bad faith conduct was repeated and persistent, and that it resulted in an inevitable and significant increase in costs for the Applicant at a number of steps in the case.

[21] For instance, the Respondent failed to comply with the Family Law Rules regarding financial disclosure as well as subsequent court orders (at least one of which he entered into on consent) requiring him to make disclosure of various pieces of information. While the litigation spanned a number of years, and this breach of the court’s orders might have been easily remedied by him, he never made the required disclosure, even after an appeal confirming his Answer would be struck on the financial issues because of his failure to disclose. The Court of Appeal characterized the Respondent’s failure to make disclosure as “willful disobedience”.

[22] This conduct alone might be described as deliberately obstructive to the determination of the considerable and important financial issues in the litigation. I have no doubt that it was when I consider the totality of the evidence heard during the uncontested trial, including the evidence about the efforts made by Mr. Clark to obtain additional information from the Respondent or his accountant in assessing what income was available to the Respondent for support purposes. The Respondent put up roadblocks at every step of the way. I am satisfied that the Respondent’s bad faith conduct left the Applicant with no option but to go to the considerable expense of retaining at least two expert witnesses and to require them to testify in support of her case.

[23] Additionally, there is evidence which was presented during the proceedings over which I presided that persuades me on a balance of probabilities that the Respondent was attempting to conceal assets during the course of this litigation. That such conduct is in bad faith is self-evident. Transcripts from another proceeding where the Respondent testified support the finding that the Respondent concealed a beneficial interest in a property because he was “going through a divorce”. I am satisfied this was a reference to the litigation in this case.

Other Rule 24 factors

[24] In setting the amount of the costs award, I also consider other factors set out in Rule 24 of the FLR.

[25] I agree with the Applicant’s submission that while the legal issues themselves are not of high complexity, the proceeding has, because of the Respondent’s conduct, become more complex factually and procedurally. This has significantly increased the costs that are proportionate and reasonable to the issues.

[26] Not a single fact or issue was conceded. No legal issues were narrowed prior to trial. The hours spent by legal counsel in presenting the Applicant’s case are entirely reasonable in the circumstances. Given counsel’s experience, and the need for highly experienced counsel on a case like this, the fees expended for legal counsel are also reasonable.

[27] There can be no doubt that the trial issues were of enormous importance to the Applicant, who was without any of the support to which she and the children in her care were entitled for almost 6 years, and whose ongoing financial security was at stake. In these circumstances, and given the Respondent’s conduct, the legal and expert witness fees incurred are entirely reasonable.

[28] I also consider that the Respondent did not respond to the offer to settle presented to him by the Applicant, notwithstanding that its terms were severable. This is one more instance of unreasonable behaviour and his failure to do anything at all to limit the issues to be litigated.

[29] The Respondent’s conduct was also unreasonable in other respects. For instance, the costs award of $1000 against the Respondent made by Justice Lafrance-Cardinal on May 29, 2019, was made because of the “lax attitude” the Respondent demonstrated toward the implementation of an interim order.

[30] A few months later, notwithstanding this costs award, the Respondent failed to attend a motion date that was scheduled to permit him to address whether, notwithstanding his Answer being struck, he should have any participation rights during the upcoming trial. This motion was scheduled by the court and the Respondent was directed to file material. The Respondent filed nothing and did not attend the date scheduled for the motion. The Respondent ultimately did attend the trial, and, as I noted in my Reasons for Decision, interjected in the proceedings at various times. While it was the Respondent’s option to choose not to advance a motion to permit him to participate, he was present when the date was set for that motion and served with the Applicant’s materials for the that motion. There was no communication with the court or counsel before service was effected or afterwards indicating that he would make no submissions on the issue of his participation. At the very least, this conduct is relevant under Rule 24(7).

[31] Finally, I also consider that the Respondent has not paid any of the costs awards ordered against him throughout these proceedings. He has shown no respect for the court process or the court’s orders. He has also had fair notice of how costs are assessed and apportioned and why, but he has continued to conduct himself unreasonably and in bad faith.

[32] One of the purposes of a costs award is to “discourage and sanction inappropriate behaviour by litigants”. While I am mindful that it is not the only objective the court must consider, the fulfilment of that objective weighs heavily in favour of a costs award on a full recovery basis in this case.

The application of Rule 18

[33] While there is some merit to the suggestion by the Applicant that her offer to settle was at least as favourable to the Respondent as the court’s ultimate judgment, I do not find it necessary to resolve this issue. I prefer to consider the parties’ conduct relating to offers to settle within the scope of Rule 18(16) and Rule 24(12). As I have noted above, the offer made to the Respondent was severable. There is no evidence he made a counter offer or otherwise engaged in any meaningful attempt to resolve the issues prior to trial. I am satisfied that the Respondent’s failure to make any offers to settle is more evidence that he had no interest in genuinely working towards the settlement of any of the issues in this litigation.

Conclusion on the amount of costs

[34] The finding that the Respondent acted in bad faith persistently and repeatedly gives rise to a presumption that costs will be awarded on a full recovery basis: Rule 24(8). Having regard to all the other circumstances I have considered and outlined, I am satisfied that this presumption should apply. Costs will be ordered on a full recovery basis.

[35] I am also satisfied that the costs submitted by the Applicant are proportionate and reasonable given the circumstances of the case, and that the full recovery of her costs is fair and just.

Enforcement by the Family Responsibility Office

[36] The Applicant requests that the following costs be designated as enforceable pursuant to s. 1(1)(g) of the Family Responsibility and Support Arrears Enforcement Act [“FRSEA”]:

a. 2/3 of the costs and disbursements of the trial except for the expert fees for Dave Clarke;

b. The entirety of the fees for Dave Clarke, being $19,434.04;

c. 2/3 of the costs and disbursements of the Participation Motion; and

d. The entirety of the costs and disbursements of the Preservation Motion as the assets to be preserved relate to enforcement of child and spousal support.

[37] Section 1(1)(g) of the FRSEA provides that “support order” means a provision in an order made in or outside Ontario and enforceable in Ontario for the payment of money as support or maintenance, and includes a provision for interest or the payment of legal fees or other expenses arising in relation to support or maintenance.

[38] In Wildman v. Wildman, the court made clear at paras. 56-59 that costs awards relating to support orders come within the meaning of section 1(1)(g) may be enforceable by the Family Responsibility Office. The court’s directives are worth repeating in their entirety:

The validity of an order making a costs award at trial enforceable by the Family Responsibility Office was specifically affirmed by this court in Drygala v. Pauli (2003), 35 R.F.L. (5th) 323 (Ont. C.A.) at para. 16. Indeed, in that case the court went even further and ordered, at para. 17, that costs of the appeal also constitute a support order and "are fully enforceable by the Family Responsibility Office."

I note that both s. 1(1)(g) of the FRSEA and the wording of the court's endorsement in Drygala v. Pauli use the terminology of "enforceable", not "payable and enforceable" as in the order in this case. The respondent concedes that nothing is added by the words "payable and". For the sake of accuracy, they should be deleted from paragraph 14 of the order.

The appellant makes a second argument on this issue. He contends that the trial and the final order dealt with several issues other than support, including custody, access, property, debts, and preservation, freezing and charging orders. The appellant submits that only those costs relating to support should be enforceable pursuant to s. 1(1)(g) of the FRSEA.

I disagree. The principal issue at trial was spousal and child support. In any event, I agree with Thomson J.'s observation in Stancati v. Stancati (1984), 49 O.R. (2d) 284 (Ont. Prov. Ct.), at 287: "It seems to me to be both impractical and inappropriate to suggest that this court should attempt to dissect cost awards in order to determine which part of the award relates to the support aspect of the proceedings." I also note that Drygala v. Pauli was a multi-issue matrimonial case in which this court upheld the trial judge's order that all costs be enforceable by the Family Responsibility Office.

[39] With one exception which I will discuss further below, I am satisfied that it is fair and just to order that the costs I have outlined above be enforceable pursuant to s. 1(1)(g) of the FRSEA. I find that the costs sought by the Applicant all relate to the support aspect of the proceedings. I also find that child and spousal support are fairly characterized as the principal issues in the litigation.

[40] I am amply satisfied that the entirety of the fees paid to Mr. Clark were related to the issue of determining the Respondent’s income for support purposes and should be fully enforceable.

[41] I further find that apportioning 2/3 of the costs of the trial proceedings and the participation motion is a fair and reasonable approach to designating the amount of costs that should be enforceable from these two aspects of the proceedings under the FRSEA. This is because this proportion of the fees accords generally with the proportion of time and expense that would have been required to litigate the issues relating to child and spousal support in this case relative to the others. In any case, as Wildman makes clear, in a trial involving issues in addition to the principal issues of child and spousal support, I am not required to dissect what amount is appropriately related to the support aspects of the case. I find the position taken by the Applicant is fair and reasonable, and I accept her submissions on this issue.

[42] The preservation motion was brought under the authority of section 12 of the Family Law Act. This was a discrete proceeding and the fees associated with it are entirely severable from the fees for the trial.

[43] Under the terms of section 12 of the Family Law Act, the preservation order may be made where it is necessary for the protection of the other spouse’s interests “under this Part”. The Part being referenced is Part I “Family Property”. Part I governs the equalization of net family property, but not child or spousal support. Accordingly, while I am satisfied that the Respondent should bear the full costs of that motion, I am not persuaded that those costs should be enforceable by the Family Responsibility Office because they do not relate to a support order and were not “expenses arising from support or maintenance”.

[44] As far as the particulars for each of the amounts I have allowed are concerned, I confirm that I accept the documentary evidence provided by the Applicant with her written submissions to substantiate the totals for each fee or proceeding.

Conclusion

[45] For these reasons, I find that the Applicant is entitled to the costs she seeks. Accordingly, the Respondent shall pay costs in the amount of $217,229.25 (inclusive of disbursements and HST) immediately.

[46] The following costs will be enforceable by the Family Responsibility Office pursuant to s. 1(1)(g) of the FRSEA:

a. 2/3 of the costs and disbursements of the trial except for the expert fees for Dave Clarke;

b. The entirety of the fees for Dave Clarke, being $19,434.04;

c. 2/3 of the costs and disbursements of the Participation Motion.

[47] The order need not be provided to the Respondent for his approval. It may be submitted to my attention for that purpose.

The Honourable Justice Laurie Lacelle

Released: July 17, 2020