Court File and Parties
Court File No.: FC-FO000079-0001 Date: 2020-10-14 Superior Court of Justice - Ontario
Re: Olga Knocke, Applicant/Respondent in Appeal And: Peter Knocke, Respondent/Appellant
Before: Justice L. Sheard
Counsel: Applicant/Respondent in Appeal - Unrepresented Deborah Ditchfield and Nolan Wilson for the Respondent/Appellant
Heard: In Writing
Decision on Costs
Overview
[1] This decision determines the costs issues between the parties.
[2] On August 26, 2020, I released my decision respecting the Respondent’s appeal of the costs order of Hilliard J., made April 24, 2019, awarding the Respondent costs of $2,500 in respect of 1) a motion brought by the Applicant for leave to file an Amended Response to the Respondent’s motion to change; and 2) a second motion brought by the Respondent for summary judgment[^1]. While the Applicant was granted leave to file her Amended Response, the Respondent was successful on his motion for summary judgment, which resolved the litigation in its entirety.
Costs to be Determined
[3] The Respondent asks this court to fix the costs of the following:
(i) the Respondent’s motion for leave to appeal the costs award, on which the Respondent was successful;
(ii) the hearing before the motion judge to settle the terms of a prior order;
(iii) the motion brought by the Applicant to introduce fresh evidence on the appeal, on which, the Applicant was unsuccessful;
(iv) the appeal itself on which the Respondent was successful: specifically, the $2,500 costs awarded by the lower court was replaced with an award of $14,000 plus disbursements of $271.05 and HST of $1,855.24 ($14,271.05 x 13%), for a total award of $16,126.29; and
(v) the costs submissions filed.
[4] The parties were invited to try to resolve the costs issues, failing which, they were permitted to make written costs submissions to me. The parties were not able to agree.
[5] Having received and considered the parties’ costs submissions, this is my decision on costs.
Positions of the parties
[6] The positions taken by the parties in their costs submissions are strikingly similar to the positions each took on the appeal. The Respondent submits that as the successful party, he is presumptively entitled to his costs and that his offer to settle entitles him to costs fixed on a substantial indemnity scale. The Respondent asserts that had the Applicant accepted his settlement offer, she would have been in a better position than she is now in.
[7] The Respondent seeks costs against the Applicant fixed:
(a) on a full recovery basis in the total amount of $42,017.24 or, in the alternative;
(b) on a substantial indemnity basis up to October 17, 2019, the date of service of the Respondent’s offer to settle and, thereafter, on a full recovery basis, in the total amount of $38,247.56.
[8] Costs as per paragraph 7(b) above, would be based on $15,290.60 for fees and HST on a substantial indemnity basis, incurred up to October 17, 2019, and $21,554.75 for fees and HST on a full recovery basis, incurred after October 17, 2020. Disbursements and HST would be fixed in the total amount of $1,402.21.
[9] The Applicant submits that no costs should be awarded against her. As per her argument on the appeal, the Applicant again submits that she should not be required to pay costs because her financial situation is inferior to that of the Respondent and the negative financial impact that a costs award would have upon the Applicant’s ability to support the parties’ daughter, who lives with the Applicant.
[10] In her costs submissions, the Applicant provided the court with her 2019 tax return and Notice of Assessment, the Respondent’s US federal tax return for 2018, and a “Circus in the Tree” Invoice, which appears to relate to extracurricular expenses for the parties’ daughter.
[11] I accept that there appears to be a disparity between the income now earned by the Applicant and the income reported by the Respondent, but, as noted at paragraph 27 of the Judgment on Appeal, the Applicant has not provided the court with a current financial statement. Without the benefit of recently-sworn financial statements from each party, the court lacks the information needed to understand each party’s financial wherewithal.
[12] In her submissions, made without supporting evidence, the Applicant also asserts that:
i) the Respondent’s home is paid for by his company;
ii) the Respondent benefits from a low [U.S.] tax rate;
iii) the parties’ son, who lives with the Respondent, will be 18 in December 2020, has completed high school and works full-time and “can take care of his basic expenses himself”;
iv) the Applicant is experiencing financial difficulties both by reason of the costs award made on the appeal, which the Respondent is off-setting against his spousal support payable to the Applicant, and because of her own employment situation, which has been affected by the COVID-19 virus shutdown; and
v) the Respondent’s ultimate goal is to bankrupt the Applicant and to convince their daughter to move to the United States to live with the Respondent.
[13] As set out in the Judgment on Appeal, until the hearing, the Applicant had not made clear what “fresh evidence” she was asking the court to admit on the appeal. That omission caused the Respondent to incur costs to respond to a motion that was unclear. Also, the Applicant used her materials and submissions on the appeal and motion to admit fresh evidence to assert facts, which were not in evidence. At the hearing of the appeal, the Applicant was told that it was not proper to use submissions as a vehicle to put unsworn evidence before the court, and that the court would not consider any factual assertions not already in evidence.[^2]
[14] Despite that admonition, the Applicant has again used her submissions to state her view of events, as if they were facts, when there is no such evidence in the record before me. Of particular note is that, despite that this issue was addressed at the hearing of the appeal, the Applicant again alleges the Respondent has not paid his share of orthodontal expenses for the parties’ daughter.
[15] The Applicant refers to the 2003 Court of Appeal decision in C.A.M. v. D.M., 2003 CanLII 18880 (ON CA). In that decision, the court stated that when examining the factors under subrule 24(11) of the Family Law Rules (“FLR”), the court ought to take into account the financial position of the parties, especially of an unsuccessful custodial parent, and ought not to ignore the best interests of the child and the impact on that child of a costs award against a custodial parent.
[16] Paragraph 43 of C.A.M. v. D.M. reads:
I am also of the view that the court has a discretion not to make an award of full recovery even where the party has met the conditions in Rule 18(14). The rule makes that clear since it provides that "unless the court orders otherwise" the party is entitled to full recovery. Again, a relevant consideration would be the financial condition of the parties, especially an unsuccessful custodial parent. See Church v. Church, 2003 CanLII 2084 (ON SC), [2003] O.J. No. 2811 (QL) (S.C.J.), at paras. 14-18. Finally, I am of the view that even when making an award of full recovery the trial judge must ensure that the costs sought by the successful party are reasonable.
[17] While C.A.M. v. D.M. remains good law, in more recent cases, the Court of Appeal makes it clear that the guiding principles on fixing costs are proportionality and reasonableness. See, for example, Beaver v. Hill, 2018 ONCA 840, at paragraph 12, in which the Court of Appeal states that, as the wording of rule 24(12) “makes clear, proportionality and reasonableness are the touchtone considerations to be applied in fixing the amount of costs.” And, at paragraph 13, the Court notes that the FLR “expressly contemplate full recovery in specific circumstances” such as, under rule 18(14), when a party bests an offer to settle.
Analysis
[18] The starting point of any decision on costs is a determination of success. As stated in Judgment on Appeal, the Respondent was successful both in his opposition to the Applicant’s motion to admit fresh evidence and on the appeal itself. As such, the Respondent is presumptively entitled to his costs.
[19] In determining the quantum of costs, I must consider and apply the factors under rules 24 and 18 of the FLR.
Offers to Settle
[20] The Respondent offered to settle the appeal in return for an all-inclusive payment of $22,500 in full satisfaction of the costs of the hearing before Hilliard J. and the motion for leave to appeal. That figure allocates $17,500 for the costs of the hearing before Hilliard J., (for which the Respondent was ultimately awarded $16,126.29), plus $5,000 for the costs of his motion for leave to appeal (which are the subject of these reasons). The Respondent now also seeks costs for the Applicant’s unsuccessful motion to introduce fresh evidence on the appeal as well as his costs of the appeal itself.
[21] The Respondent states that had the Applicant accepted his offer of October 17, 2019, she would have paid only $5,000 with respect to all the costs associated with the appeal proceedings. Based on his Bill of Costs, the Respondent has incurred costs of over $42,000 related to the motion for leave to appeal and the appeal itself. The Respondent reasonably expects that he will now be awarded an amount in excess of the $5,000 that he was willing to accept before the hearing, in satisfaction of his costs associated with the appeal.
[22] Given that the amount awarded on the appeal is slightly lower than the Respondent’s offer, I find that the provisions of rule 18 do not apply. Notwithstanding, rule 24(12)(iii) of the FLR allows me to take the Respondent’s offer to settle into consideration, which I do.
[23] The law concerning the fixing of costs is summarized at paragraphs 63 - 65 of the Judgment on Appeal.
[63] The Ontario Court of Appeal in Serra v. Serra[^3] has outlined the approach that is to be taken with respect to costs:
Modern costs rules are designed to foster 3 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 CanLII 2052 (ON CA), 46 OR (3D) 330, at para 22.
[64] In its more recent decision in Mattina v. Mattina, 2018 ONCA 867, [2018] O.J. No. 5625, the court added as a fourth fundamental purpose of costs to those identified in Serra: the need to ensure that cases are dealt with justly (para. 10). The court also reiterated the principles found in rule 24 (12) that when setting the amount of costs, emphasis must be on reasonableness and proportionality.
[65] As observed by Pazaratz J. in Jackson v. Mayerle, 2016 ONSC 1556, 73 R.F.L. (7th) 278, notwithstanding the provisions of the FLR, an award of costs must take into consideration both success and reasonableness (at paras. 19–20).
What is a reasonable amount?
[24] The essence of the Applicant’s submissions is that she cannot afford to pay any more costs, given the costs that were already awarded against her on the appeal. She also submits that, as between her and the Respondent, he is in a better position to absorb the legal fees he has incurred, than she is to pay them. Finally, I understand that the Applicant is asserting that any additional costs awarded against her would negatively affect her ability to the support of the parties’ daughter, who lives with the Applicant.
[25] When fixing costs, I must determine what amount is reasonable in the circumstances. Even accepting, which I do, that the hourly rates charged by the Respondent’s counsel and law clerks were reasonable, I cannot conclude that the total amount sought in costs is reasonable in the circumstances.
[26] The net increase between the costs awarded by the lower court and the costs awarded on appeal was $13,626.29 ($16,126.29 - $2,500). Based on his offer of October 17, 2019, I conclude that the Respondent reasonably expected that the costs that might be awarded to him on the appeal were in the range of $17,000. That is the amount he was prepared to offer to settle the appeal, together with costs fixed at $5,000. I find the Respondent’s offer was reasonable and came very close to matching the amount that was awarded him on the appeal.
[27] The difficulty is that to achieve a net increase in the costs awarded of approximately $13,626, plus $5,000 for the leave motion, the Respondent incurred costs of over $42,000. The costs incurred are over double the amount the Respondent was awarded in increased costs on the appeal, assuming that the costs of the motion for leave are fixed at no less than $5,000.
[28] Given the amount involved and the Respondent’s apparent expectations of the likely amount of costs that might be awarded on the appeal (i.e. at least $17,000), I find that the amount the Respondent claims for costs exceeds a reasonable and proportionate amount. I also find that the amount claimed by the Respondent undoubtedly exceeds the costs that the Applicant could reasonably have expected to pay, if she lost the appeal.
[29] It is most unfortunate that throughout this litigation, the Applicant has taken positions that are unreasonable and that have led to increased legal fees to the Respondent. It is patently unfair for the Applicant to expect that she may take any unreasonable position she wishes, refuse to accept any reasonable offer to settle, and then assert that she ought to be immune from any costs consequences by virtue of the fact that she and the Respondent are not in the same financial situation. Without a proper evidentiary basis, it is also unreasonable and unfair for the Applicant to use a projected impact of a costs award on the parties’ daughter to shield the Applicant from any financial consequence of the choices she has made in the litigation.
[30] Notwithstanding the foregoing, I must apply the principles as set out by the Court of Appeal and found in the FLR and fix an amount in costs that is in keeping with the goals of costs awards, is fair, reasonable, and proportionate, and takes the parties’ respective circumstances into account.
Disposition
[31] Without intending to punish the Respondent for having retained senior and capable counsel and recognizing that he has made bona fide efforts to resolve the litigation with the Applicant, I have determined that the amount to be fixed for legal fees for the matters identified at paragraph [3] above, to be $25,000 inclusive of disbursements and HST.
[32] As the appeal relates to child support, this costs award shall be enforceable pursuant to the provisions of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31, as amended.
Justice L. Sheard
Date: October 14, 2020
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Olga Knocke Appellant
- and –
Peter Knocke Respondent
DECISION ON COSTS
LS
Released: October 14, 2020
[^1]: Judgment on Appeal, 2020 ONSC 5065. [^2]: Supra, at para. 29. [^3]: 2009 ONCA 395, at para. 8, 66 R.F.L. (6th) 40.