Overview

[1] On May 19, 2020, I granted the Applicant’s motion to change and ordered certain relief, including a shared parenting schedule: Neves v. Pinto, 2020 ONSC 3098 (the “Reasons”). Counsel subsequently raised certain issues regarding the terms of a draft order and made further submissions on the appropriate terms by Rule 14B motion.

[2] In the meantime, the parties also made submissions on costs. This Endorsement will deal with both the relief ordered and costs of the motion to change. Given that no order has been issued and entered to date, no amendment to an existing order is required. My Reasons, however, should be read in conjunction with this Endorsement.

Analysis

Terms of the Draft Order

Child Support

[3] In my Reasons, I ordered that the Applicant pay the Respondent monthly child support of $683, after setting off the amount of monthly child support to be paid by the Respondent to the Applicant. Counsel subsequently advised me that to receive child-related tax benefits, the order must state that each parent pay child support, rather than the set-off amount. They have consented to the terms of an order.

[4] The terms of the order are to reflect that table child support for the children of the relationship shall be payable by both parties commencing June 1, 2020 and on the first day of each month thereafter as follows:

a. The Applicant shall pay to the Respondent $2,030 per month in child support, based on an annual income of $146,000.

b. The Respondent shall pay to the Applicant $1,373 per month in child support, based on an imputed annual income of $89,703.

Arrears for Support and Childcare Expenses

[5] In my Reasons, I found that the Applicant owed the Respondent $11,837.56 in arrears of childcare expenses. On the Rule 14B motion, counsel advised that the amount owing by the Applicant ought to have been calculated on an after-tax basis, as opposed to the gross amount. Although the matter was not raised at trial, both parties agree that the amount owing by the Applicant should be calculated on the after-tax amount of childcare expenses.

[6] The parties’ calculations differ slightly. The Applicant calculates that he owes $5,841.05 in childcare expenses and the Respondent calculates that the Applicant owes $7,600.50.

[7] Having reviewed both parties’ calculations, I agree with the Respondent that the total childcare expenses in my Reasons did not account for $1,398 previously paid by the Applicant. The gross childcare expenses from 2016 to 2019 thus total $26,270. The after-tax amount is $16,395. The Applicant’s share is 61.9 percent, or $10,148.50. Once the total amount previously paid by the Applicant, $2,548, is subtracted the remaining amount is $7,600.50

[8] In my Reasons, I had also found that the Respondent owed the Applicant $18,794 in child support arrears. The Applicant requests that rather than stating that each party owes the other a certain amount, which would result in two separate enforcement files with the Family Responsibility Office, the order should state only the amount owed by the Respondent, after the amount owed by the Applicant is set off. The Respondent does not oppose this request.

[9] Therefore, the amount of $7,600.50 owed by the Applicant for childcare expense arrears is to be set off the $18,794 owed by the Respondent to the Applicant for child support arrears. The Reasons, and draft order, should thus reflect that the Respondent owes the Applicant the amount of $11,193.50 in child support arrears.

Costs

[10] The Applicant seeks full indemnity costs of $66,356.11, including disbursements and HST, on the basis that the Respondent acted in bad faith. He relies on r. 31(5) to seek punitive costs of an additional $20,000. The Applicant further submits that the result of the trial was more favourable than his offers to settle and that he is therefore entitled to full indemnity costs from the date of his earliest offer or, alternatively, from the date of subsequent offers.

[11] The Respondent opposes the request for full indemnity costs and punitive costs on the basis that her conduct does not warrant such costs. The Respondent further submits that the Applicant’s offers fail to meet the requirements of r. 18(14) and that the Applicant was not more successful at trial than his offers to settle. The Respondent submits that an appropriate amount of costs is $25,000.

Applicable Principles

[12] The overall objective in determining costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case: Boucher v. Public Accountants Council of Ontario, [2004] O.J. No. 2634 (C.A.), at para. 24. There is a presumption that the successful party will be entitled to costs: r. 24(1), Family Law Rules, O. Reg. 114/99.

[13] The Court of Appeal has identified the four fundamental purposes that modern cost rules are designed to foster: (i) to partially indemnify successful litigants; (ii) to encourage settlement; (iii) to discourage and sanction inappropriate behaviour by litigants; and (iv) to ensure that cases are dealt with justly: Mattina v. Mattina, 2018 ONCA 867, at para. 10.

[14] The exercise of judicial discretion in awarding costs is guided by Rule 24 of the Family Law Rules, both in terms of the entitlement of a party to an award of costs as well as to the quantum of that award. The considerations in determining the appropriate quantum of a costs award are found in Rule 24(12), which reads as follows:

24(12) 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) and 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 expense properly paid or payable; and

(b) any other relevant matter.

[15] In assessing the success of a party, the court looks to the positions taken by the parties at trial, Berta v. Berta, 2015 ONCA 918, at para. 102, as well as to the offers to settle exchanged by the parties as compared with the terms of the final order: Lawson v. Lawson, [2008] O.J. No. 1978 (Sup. Ct.).

[16] Rule 18(14) provides that, unless the court orders otherwise, a party is entitled to costs to the date the offer was served and full recovery of costs from that date subject to certain conditions being met. One of the terms to be met is that the party who made the offer must have obtained an order that is as favourable or more favourable than the offer. To trigger the potential of full recovery costs pursuant to 18(14) a party must do as well or better than all of the terms of an offer (or a severable section of an offer): Chomos v. Hamilton, 2016 ONSC 6232, at para. 19. The onus of proving that the offer made was more favourable than the result at trial rests with the person claiming the benefit of full recovery costs: r. 18(15).

[17] In addition, r. 24(8) of the Family Law Rules provides that the court “shall decide costs on a full recovery basis” if a party has acted in bad faith. Rule 24(8) requires a fairly high threshold of egregious behaviour, and as such a finding of bad faith is rarely made: Chomos v. Hamilton, at para. 43.

[18] Other than as provided in rr. 24(8) or 18(14) there is no provision in the Family Law Rules that provides for a general approach of “close to full recovery” costs: Beaver v. Hill, 2018 ONCA 840, at para 11.

Disposition

Offers to Settle

[19] The offers made by the Applicant in his conference briefs on December 5, 2018, March 25, 2019, and June 3, 2019 are not offers to settle within the definition of r. 18(14). The offers were made in the context of case conferences. Moreover, none of the offers specified that they were open until trial.

[20] The Applicant made a Rule 18 offer to settle on June 3, 2019. In determining whether the Applicant obtained a result as favourable or more favourable than the Offer, “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.” Chomos v. Hamilton, at para. 19.

[21] The June 2019 offer was severable, other than the provision relating to spousal support which could only be accepted if all of the other terms were accepted. The Applicant was as successful or more successful than the offer in relation to the parenting schedule, child support, spousal support, and the use of Our Family Wizard.

[22] The Applicant was not successful in having one-half of the funds held in a jointly held bank account disbursed to him. In addition, in my Reasons, I also ordered adjustments of child support for past years where the Applicant had not paid according to his income and for childcare expenses that had not been paid. The June 2019 offer did not account for retroactive payments by the Applicant. As a result, it is not clear that the Applicant was as successful or more successful than the June 2019 offer.

[23] Moreover, the June 2019 offer is problematic in other respects. On the issue of child support, the offer states that both parties were “to pay each other table child support.” The offer was not clear as to what income was to be used. This lack of clarity would have made it difficult for the Respondent to accept the offer, because she would not have known to what she was agreeing. The same applies to the term relating to s. 7 expenses.

[24] The June 2019 offer is also problematic because of the term relating to costs. The offer stated that if any part of the offer were accepted before June 12, 2019, the Respondent would have to pay the Applicant costs of $3,000. If the Respondent accepted after June 12, 2019, the Respondent would have to pay the Applicant’s full indemnity costs.

[25] An offer that includes costs obligations not yet determined by the court does not satisfy the requirements of r. 18(14) because the costs are not yet determined by the court: Chomos v. Hamilton, at para. 29; Raaflaub v. Gondosch, 2020 ONSC 3113, at para. 13. As Pazaratz J. noted in Chomos v. Hamilton, the Respondent could not accept the substantive terms of the offer without also accepting a potentially onerous costs penalty.

[26] The offer to settle made on January 2, 2020 suffers the same deficiencies and, in any event, was not made at least seven days before trial. As a result, it does not meet the requirements of r. 18(14). While the Applicant’s offers to settle do not meet the requirements of r. 18(14), I can nonetheless take them into consideration under r. 18(16).

Bad Faith

[27] The Applicant’s position is that the Respondent should be required to pay full indemnity costs because the motion to change was necessitated only by the Respondent’s conduct in refusing to agree to an equal parenting schedule, something that had been contemplated in the final order of Moore J. In addition, the Applicant highlights the Respondent’s failure to disclose financial information and her attempt to hold funds outside the court’s enforcement jurisdiction by using a bank account in her mother’s name.

[28] In my Reasons, I found that the Respondent’s behaviour was far from exemplary. In addition to adopting an unreasonable position on Moore J.’s order, which resulted in an unnecessary motion, she failed to follow the Rules and court orders relating to disclosure and was obstructive and disingenuous.

[29] However, I am not satisfied that the Applicant has met the high threshold of demonstrating that the Respondent behaved in an egregious manner. The Respondent behaved unreasonably. Certain of the Respondent’s conduct, such as using a bank account in her mother’s name, was dishonest. Other conduct, such as failing to provide information to keep the children on the Applicant’s benefits program, was contrary to their interest. There is no justification or explanation for such misguided conduct. Nonetheless, considering the Respondent’s behaviour on the whole, I am unable to conclude that it was in bad faith, in the sense that her conduct was “deliberate and intended to harm, conceal or deceive.” Cummings v. Cummings, 2020 ONSC 3592, at para. 16. In my view, the Respondent’s conduct in the proceeding was more irrational than it was intentionally deceitful.

[30] Moreover, full indemnity costs are reserved for exceptional circumstances. Given the high threshold, and my concerns about the impact of an order for full indemnity and/or punitive costs on the Respondent’s ability to support the children, I find that this is not an appropriate case for full indemnity costs.

[31] Similarly, I decline to order punitive costs as requested by the Applicant. The Respondent’s failures to disclose were addressed by the imputation of income to the Respondent. Moreover, while the Applicant relies on r. 31(5), that rule relates the relief that the court may order when a party is found in contempt of court. No finding of contempt has been made here, and there is no basis for a punitive order.

Quantum

[32] As to the other relevant factors, the Applicant was the successful party on the motion and is presumptively entitled to costs. The Respondent submits that success was divided because she was more successful than the Applicant on the issue of spousal support. This is incorrect. While the Respondent was more successful than her offer as it related to spousal support, at trial, the Respondent’s position at trial was that spousal support should not be terminated. The Applicant was thus more successful than the Respondent on the issue at trial. In addition, the fact that certain issues were resolved at trial does not mean that success was divided.

[33] The motion was not complex but was rendered somewhat more difficult because of the Respondent’s failure to disclose. The Respondent too made offers to settle, including to terminate spousal support on a date earlier than that which was ordered. However, none of her offers compromised on the parenting schedule, which was the primary issue for the Applicant. To their credit, the parties were able to reach a resolution on a number of matters relating to parenting.

[34] The Respondent submits that the Applicant’s fees are higher than necessary because changed counsel shortly before trial when his lawyer was no longer available. It is possible that this resulted in some additional time spent by Applicant’s new counsel to get up to speed. However, the Respondent’s bill of costs shows that she incurred roughly the same amount in legal fees as the Applicant. The Respondent incurred $72,318 in legal fees, including case conferences. The Applicant incurred $74,935.95, including case conferences. The Respondent opposes fees for time spent on case conferences which, in any event, the Applicant does not seek. The Applicant’s fees without case conferences were $65,486.33. This suggests that the Applicant’s fees are not excessive. I would note, however, that the Applicant’s trial counsel, who was called to the bar in 2003, has a significantly higher rate ($450/hour) than his previous counsel who was called in 2009 ($325/hour) and is significantly higher than Respondent’s counsel, who was called to the bar in 2005($350/hour). Some reduction to the fees is warranted.

[35] Applying the above factors, and the principles of proportionality and reasonableness, I find that a fair and reasonable amount of costs of the motion on a partial indemnity basis is $37,000, including disbursements and HST, and fix costs accordingly.

[36] The Respondent requests that costs be payable by equal monthly or yearly installments because of the impact of a costs award on her ability to support the children. After the first trial, the Respondent was given 10 years to pay a costs award of $50,000. Despite this very lenient payment schedule, and having a secure job at a financial institution, enforcement proceedings were required. To avoid this situation recurring, the Applicant seeks to have the costs order enforceable as support by the Family Responsibility Office.

[37] The evidence is that the Respondent has secure employment and a regular salary, and that she has funds available from a home equity line of credit. Her net worth is higher than the Applicant’s. The impact of the previous costs award was alleviated significantly by a lengthy payment schedule. In my view, while some time should be allowed for the payment of costs, a 10- year period would be too long and would lead to other issues. Therefore, costs shall be payable over four years, with the first installment of $15,000 due within 30 days of this order. The balance of $22,000 shall be paid in equal yearly instalments of $7,333.33 each by October 31, 2021, October 31, 2022, and October 31, 2023.

Conclusion

[38] Based on the foregoing, the relief ordered in my Reasons is amended as follows:

a. Beginning on June 1, 2020 and on the first day of each month thereafter, the Applicant shall pay to the Respondent $2,030 per month in table child support for the children of the relationship, based on an annual income of $146,000;

b. Beginning on June 1, 2020 and on the first day of each month thereafter, the Respondent shall pay to the Applicant $1,373 per month in table child support, based on an imputed annual income of $89,703; and

c. The Respondent shall pay the Applicant $11,193.50 in child support arrears.

[39] In addition, the Respondent shall pay the Applicant’s costs of the motion in the amount of $37,000, all-inclusive, as follows:

d. The Respondent shall pay costs of $15,000 forthwith, but no later than 30 days of this order;

e. The Respondent shall pay the balance of $22,000 in three equal yearly instalments of $7,333.33 by October 31, 2021, October 31, 2022 and October 31, 2023; and

f. This order is enforceable as support by the Family Responsibility Office.

[40] This endorsement is an order of the court enforceable by law from the moment it is released. Counsel may submit an approved draft order in accordance with my Reasons and this Endorsement for my signature.

Nishikawa J.

Date: August 31, 2020

Neves v. Pinto, 2020 ONSC 5193

Case Summary

Overview

Analysis

Terms of the Draft Order

Child Support

Arrears for Support and Childcare Expenses

Costs

Applicable Principles

Disposition

Offers to Settle

Bad Faith

Quantum

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 3

Legislation 1