NEWMARKET COURT FILE NO.: FC-16-50654-00

DATE: 20201102

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Lakmini Udeshika Liyange Jayawickrema

Applicant

– AND –

Aravinda Liyanage Jayawickrema

Respondent

J. Wijesundera, Counsel for the Applicant

E. Moaveni, Counsel for the Respondent

HEARD: In Writing

RULING ON COSTS

JARVIS J.

[1] This Ruling deals with trial costs. The applicant (“the wife”) claims that she was, overall, more successful than the respondent (“the husband”) and incurred costs of $133,961.20 comprising fees ($76,190), disbursements ($47,858.86) and HST ($9,912.34). She seeks an award ranging between this amount and some lesser (but not quantified) partial indemnity amount as determined by the court. The husband claims that he was successful at trial. His costs totalled $379,454.26 but, in consideration of the wife’s means, he is prepared to accept $207,000, all-inclusive: apart from the claim for $90,900 for expert fees it was not possible from his Bill of Costs to identify its HST component because many of the services provided and disbursements incurred were recorded as a block fee.[^1]

[2] The parties exchanged several Offers to Settle, none as favourable or more favourable to the claimant than the judgment.

Law

[3] Family Law litigants are encouraged to settle their disputes as much as possible without resort to the courts and to seek reasonable compromise of their disputed issues. Sections 18(14) 2-5 and 24(1), (5), (6) and (12)(a) and (b) of the Family Law Rules (“the Rules” or “Rule”) deal, respectively, with the exchange, and non-acceptance, of Offers to Settle and guide the exercise of the court’s discretion in considering its award.

COSTS CONSEQUENCES OF FAILURE TO ACCEPT OFFER

18. (14) 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 the following conditions are met:

19. If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.

20. The offer does not expire and is not withdrawn before the hearing starts.

21. The offer is not accepted.

22. The party who made the offer obtains an order that is as favourable as or more favourable than the offer.

SUCCESSFUL PARTY PRESUMED ENTITLED TO COSTS

24. (1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.

DECISION ON REASONABLENESS

(5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,

(a) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;

(b) expenses properly paid or payable; and

(c) any other relevant matter.

DIVIDED SUCCESS

(6) If success in a step is divided, the court may apportion costs as appropriate.

SETTING COSTS AMOUNTS

(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) 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. O. Reg. 298/18, s. 14.

[4] The principles guiding the court’s exercise of its discretion pursuant to the Rules are well-established. The primary objective, of course, is to enable the court to deal with cases in a fair and timely manner. Four fundamental purposes are served: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; (3) to discourage and sanction inappropriate behaviour by litigants;[^2] and (4) to ensure that cases are dealt with justly.[^3] Family law litigants must act in a reasonable and cost-effective way: they should, and will, be held accountable for the positions they take in their litigation.[^4] As observed by the Court of Appeal in Beaver v. Hill[^5] reasonableness and proportionality frame the exercise of the court’s discretion; the amount to be awarded is what the “court views as a fair and reasonable amount that should be paid by the unsuccessful [party]”: Boucher et al v. Public Accountants Council for the Province of Ontario.[^6] Of considerable relevance to the claims made in this case is the observation of A.J. Goodman J. in Miziolek v. Miziolek and Miziolek,[^7]

[32] There must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated.

[5] These observations are especially apt when considering the parties’ competing claims for costs in this case. To put those in perspective, the aggregate of the costs incurred ($513,415.46) exceeds the combined values of the parties’ net family properties ($384,233.07). Even so, the costs aggregate is probably much higher since the wife’s Bill of Costs only reflects services and disbursements for the period from and after April 23, 2019. Overlooked is the fact that this litigation started in 2016: four years of litigation, a disclosure and child and spousal support motion heard on January 18, 2017,[^8] three mediation attempts, three case conference events, two settlement conferences, three trial scheduling conferences, a pre-trial conference shortly before the trial started (colloquially called an “exit pre-trial”), seven days of trial (including a mid-trial motion heard by Rowsell J.) and further submissions on the issue of unconscionability, a trial issue that neither party appropriately addressed in their written closing submissions. It is a reasonable inference that the combined costs incurred by the parties in their litigation nears $600,000.

Cost considerations

[6] Neither of the party’s Bill of Costs for these proceedings was very helpful. For example, as already noted, the wife’s $133,961.20 Bill did not deal with anything before April 23, 2019. The Bill that was submitted identified the service date, the work performed, time spent and the service provider. The hourly rates charged were reasonable ($320 for the lawyer and $70 for the student) and the time recorded as being spent reasonable too.

[7] The husband’s $379,454.26 Bill was unhelpful because it purported to reflect compensable services predating the wife’s arbitrary April 23, 2019 date to the end of the trial and, surprisingly, summarized in less than two pages, with minimal detail, services for which a block fee was claimed: pre-trial fees ($63,000); pre-trial preparation ($21,000); attendance at trial ($100,000); and, post-trial events ($30,000). The Bill claimed, for example, 180 hours without any meaningful detail for $63,000 in pre-trial fees involving “court attendances and preparation for court attendances, mediation (8 hours) and attendance of case conferences, settlement conferences and motion for disclosure, Pre-Trial Management”. The format for this Bill and the quality of information provided contrasts starkly with an included, detailed (but only partial) account from the husband’s prior lawyer which is broken down into date of service, a description of the billable activity, the time spent, amount claimed and identity of the service provider. That lawyer’s trust account ledger was of no assistance to assessing the value of those services now claimed by the husband.

[8] The lawyer’s hourly rate ($350) was not unreasonable.

[9] Excepting the wife’s more time-limited Bill, it should be clear from the foregoing that it is simply impossible from the parties’ Bills to determine the value of the individual components of the presumptively compensable events for which each party was claiming costs for these proceedings and to comparatively assess the parties’ accounts.

Assessment

[10] Section 24(12)(a) and (b) of the Rules require the court to set costs that are reasonable and proportional to the importance and complexity of the issues in a case and list the factors to be considered.

24(12)(a)(i) Each party’s behaviour

[11] Neither party acted reasonably. For example, despite the fact that each claimed a different valuation date, neither prepared calculations, or led evidence, dealing with the other’s date. That would have helped them to generate settlement options well before the enormous expense of trial preparation and trial time.[^9] The fact is that the wife grossly overreached in her efforts to attribute assets and income to the husband and he fueled that behaviour by his non-disclosure and misrepresentations. As noted in the decision,

[26] In my view, neither party properly complied with the disclosure obligations which the issues in this case required of them: each appeared to have little sense of what was expected and even less willingness to accept responsibility for their non-disclosure behaviour. This failure affected the court’s assessment of their valuation date evidence and ultimately their overall credibility, although differently.

[12] The parties’ financial statements, particularly those of the wife, were sequentially inconsistent and even inconsistent with her contemporaneous net family property statements. As also noted in the decision, the calculation of each party’s net family property was complicated by the “inconsistency with which they recorded the values of their Canadian and non-Canadian assets, their failure to transparently disclose the applicable [foreign exchange] conversion rate and their indiscriminate combining of those values with non-adjusted values in the designated columns of the prescribed financial, and net family property statement form”.[^10]

24(12)(a)(ii) The time spent by each party

[13] The wife’s Bill of Costs recorded 235.6 hours for her lawyer’s time relating to the trial and 11.4 hours for her articling student for a total of 247 hours. Since the trial was originally scheduled to proceed during the May 2019 sittings of the court but could not be reached and was adjourned Ms. Wijesundera had to prepare for the May trial in any event. Preparation was also needed for the November trial although the issues then did not involve parenting as those had been settled in late October. Even so, the November trial preparation time was almost double that recorded for the May trial. Discussion with the wife’s experts appears as an estimate as does the 36 hours recorded for the lawyer preparing documents during the trial, reviewing and summarizing each day’s trial evidence. Full hourly rates are claimed for travel and waiting time.

[14] Comparison with the husband’s Bill is far more problematic. Ms. Moaveni block-fee’d her pre-trial preparation (as distinct from her pre-trial fees) but represented 60 hours being spent for those services ($21,000), a block fee for the trial ($100,000) without any details and a further amount for post-trial services ($30,000) such as a closing statement, submissions on the unconscionability issue directed by the court and costs submissions, thereby bringing the total to somewhere in excess of $151,000.

[15] There is no recorded indication that the parties tried sensibly to engage with each other to understand or address the other’s case (such as having their experts collaborate on the valuation issues in dispute, which the court directed be done during the trial). The time spent was excessive in relation to the value of the disputed issues, the parties Offers (see below) and the outcome at trial.

24(12)(a)(iii) Any written offers to settle, including offers that do not meet the requirements of rule 18

[16] The Family Law Rules and prescribed forms promote and, in the case of a settlement conference, mandate the exchange of an Offer to Settle. This is the chronology, and these are the relevant terms, of the Offers, or claimed Offers, and acceptance of various terms of those Offers in this case:

(a) The husband says that he offered to settle the equalization issue at a case conference “inter alia other relief” on April 29, 2017. There was a Settlement Conference held that day in which the husband’s Brief contained an Offer to Settle. This was included in the husband’s submissions but will not be considered - Offers to Settle contained in settlement conference briefs are not to be disclosed even when dealing with final submissions for costs;[^11]

(b) The husband made a severable Offer dated April 29, 2019 with respect to child and spousal support terms that, in the copy provided to the Court, are lined-out or marked “Unresolved”. There is no reference to equalization;

(c) The husband made a severable Offer dated May 14, 2019 that with respect to the trial issues (the case was scheduled to be heard during the May sittings of the court) proposed that the husband’s income be imputed at $65,000, spousal support payable pursuant to an earlier temporary Order of the Court be terminated retroactive to February 1, 2017 (thereby impliedly requiring the wife to repay, or credit the husband with, the support already paid, although this is not made clear) and requiring the wife to pay him an equalization payment of $65,000. Other terms of that Offer dealing with parenting and child support were settled before trial;

(d) The wife says that the husband made an Offer to Settle dated October 11, 2019 several terms of which she was prepared to accept and others (such as the amount of her repayment of spousal support to the husband and his payment to her of an equalization payment) remained in dispute. This information is contained in an Offer to Settle from her dated October 23, 2019. The husband neither refers to either Offer or acknowledges them in his submissions but it did form part of the wife’s later motion shortly after the trial began dealing with her acceptance of a term dealing with a spousal support repayment obligation (see (f) and (g) below);

(e) There appears to have been an Offer to Settle by the husband dated October 24, 2019 which was converted on October 25, 2019 into Minutes of Settlement resolving the parenting issues between the parties at a Trial Management Conference as per an endorsement of MacPherson J.;

(f) On October 31, 2019 the wife accepted certain severable paragraphs of the husband’s October 11, 2019 Offer dealing with her repayment to the husband of overpaid spousal support ($23,724);

(g) On October 31, 2019 the husband served an Offer dated October 30, 2019 proposing that the wife repay $45,000 for overpaid spousal support;

(h) The wife made a severable Offer to Settle dated November 11, 2019. It proposed that the husband’s income be imputed at $75,000, that the husband pay $6,799 child support arrears and that no equalization payment be made;

(i) The Husband made a severable Offer dated November 19, 2019. As this was served the day before the trial started, it does not comply with FLR 18(14) 2 but may still be considered by the court. Relevant to the trial and judgment, the husband proposed that his imputed income be $70,000, that the wife repay all of the spousal support paid to her ($44,812) and that she pay him a $65,000 equalization payment. The remaining terms are not relevant to this award;

(j) Shortly after the trial started, and as noted in the Reasons for Decision and above (see (d), (f) and (g)), Rowsell J. ruled in favour of the wife’s acceptance of the husband’s October 11, 2019 Offer dealing with overpaid spousal support and reserved costs to the trial judge;

(k) On November 26, 2019, the fifth day of trial, the wife accepted those paragraphs of the husband’s Offer dated November 19, 2019 dealing with the husband’s income (imputed at $70,000) including child support arrears ($5,483). These terms were incorporated into the judgment (paragraph 100).[^12]

[17] Three observations dominate a review of these Offers.

[18] The first is that when the trial started, the wife sought to impute a $114,000 income to the husband. This was the opinion of her expert Val Purushothaman. But after he testified, and before the trial concluded, the wife accepted the severable term of the husband’s November 19th Offer imputing him a $70,000 income. Before this the husband’s position fluctuated between $65,000 (May 14, 2019 and October 11, 2019) and $70,000 (the November 19th Offer). The wife’s two Offers proposed a $75,000 income. In other words, the dispute between the parties involved compromising a $10,000 difference in the husband’s income which they only were able to settle near the end of the trial after four days’ evidence. The impact on the monthly child support payable was around $95 a month: the impact on the arrears was about $1,400. After four days of trial!

[19] The husband’s income was not the most consuming issue. Among others was the equalization payment owed, and by whom. The wife maintained that she was owed a not insignificant equalization payment (reduced to $50,000 at trial from $69,896.77) whereas the husband maintained that he was owed $65,000. I found that the presumptive equalization payment was $66,200[^13] but awarded the husband $9,500 because it would be unconscionable to award the presumptive amount.

[20] In other words, the parties spent anywhere between $500,000 to $600,000 on issues where they were (as based on their Offers) only $95 monthly and $1,400 apart on child support and about $115,000 apart on equalization, all known well before more than six days of trial. Even though there were parenting issues, this is simply breathtaking.

24(12)(a)(iv) Any legal fees, including the number of lawyers and their rates

[21] See paragraphs [6] and [8] above.

24(12)(a)(v) Any expert witness fees, including the number of experts and their rates

[22] Fees for the reports and testimony of experts are to be treated as disbursements and differently from counsel fees.[^14] Even so, the amount allowed must be fair, reasonable, and proportional to the matter in issue and, as a general rule, not to be arbitrarily reduced.[^15]

[23] The wife called two experts at trial for which she paid $40,664.60. The husband paid $90,980.26 for his expert whose engagement also included critiquing the wife’s expert reports. Mr. Purushothaman (wife), a forensic accountant, was not qualified to express an opinion on the value of the husband’s business interests in JLI and LL but was qualified with respect to his opinion about the husband’s income. The evidence of Mr. Bhardwaj (wife) and Mr. MacKenzie (husband) dealt with the value of the husband’s business interests. Mr. Bhardwaj only testified about the value JLI: Mr. MacKenzie testified about JLI and LL.

[24] Mr. Purushothaman’s Statements of Account ($26,276.60) provided no hourly rate breakdown and included services about which he was not qualified to testify. The accounts for Mr. Bhardwaj ($14,298) and Mr. Mackenzie ($90,980.26) were more detailed. Mr. Bhardwaj provided hourly rates: Mr. Mackenzie provided a description of the services provided and the overall fee charge.

[25] Messrs. Bhardwaj and MacKenzie are Chartered Business Valuators. Once directed by the court to collaborate on the valuation issues in dispute they were very quickly able to reach a consensus on several issues most helpful to the court. Both were very helpful.

[26] The expense for Mr. Bhardwaj’s fees was reasonable. The expense for Mr. MacKenzie was greater than could be expected but for the wife’s insistence that JLI owned more realty in Sri Lanka than she was prepared to accept. The husband must bear some responsibility for this because he failed to facilitate important disclosure with respect to his family’s business in Sri Lanka (of which he was a shareholder) and financial information for LL.[^16]

24(12)(a)(vi) Any other expenses properly paid or payable

[27] Exclusive of the costs for mediation (which the parties shared), her experts and HST, the wife incurred $1,590.26 in disbursements. These are modest but, as already noted, don’t account for disbursements incurred before April 23, 2019. All appear proper.

[28] By contrast the husband claimed $17,000 as fixed costs for pre-trial and trial disbursements. I have absolutely no idea what those costs comprised because no other description for them was provided, not even copies of invoices. No opinion can be expressed whether these expenses were properly paid or payable.

24(12)(b) Any other relevant matter

[29] The wife’s net worth comes from assets she owned in Sri Lanka before the parties married. She was not compensated for the work done for LL. An award of costs against her would cripple her financially and impact her ability to support and parent the child. The husband has few exigible assets in Canada. An award against him would set-off the overpaid support and equalization payment owed.

Disposition

[30] As I observed in Gibbons v. Mulock,[^17]

Litigants are responsible for their litigation conduct and strategy.[^18] At each important step in a case a litigant, whether or not legally represented, must realistically assess the merits of their case, how best their desired outcome can be achieved and at what cost or risk. If represented by a lawyer, the litigant is responsible for the instructions they give to their lawyer: it is the lawyer’s responsibility to advise the client throughout the case and to continually reassess the case and to execute the client’s instructions professionally and in the client’s best interests, even if the lawyer disagrees with those instructions and despite the novelty or unpopularity of the cause. As observed by Whitten J. in Lammie v. Belair Insurance Co.[^19], the role of “…a lawyer is [generally speaking] to advise and encourage a client to compromise or settle a dispute whenever it is possible to do so on a reasonable basis, and to discourage a client from commencing pointless or useless proceedings.”[^20]…

[31] As reflected by the outcome at trial, this case was an enormous waste of time and money. There is little evidence that, except on the eve of a court event such as the Trial Management Conference or the imminence of trial, the parties made any meaningful effort to do a cost benefit analysis, to realistically assess not only the merits of their case but also that of the other party. Each incurred expenses they could ill afford, and caused the other to do the same. For the parties to have incurred several hundreds of thousands of dollars in excess of their combined net family properties is, quite simply, outrageous. Litigation behaviour such as demonstrated in this case is undeserving of an award of costs.

[32] Each party shall bear their own costs.

Justice David A. Jarvis

Date: November 2, 2020

[^1]: This includes total fees paid to the husband’s previous lawyer ($54,347.69). [^2]: Serra v. Serra, 2009 ONCA 395. [^3]: Mattina v. Mattina, 2018 ONCA 867 at para. 10. [^4]: Heuss v. Sarkos, 2004 ONCJ 141, 2004 CarswellOnt 3317; Peers v. Poupore, ONCJ 615. [^5]: 2018 ONCA 840, at para. 4. [^6]: (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, 48 C.P.C. (5th) 56, 188 O.A.C. 2001, [2001] O.J. No. 2634, 2004 CarswellOnt 521 (Ont. C.A.). [^7]: 2018 ONSC 4372. [^8]: In which Bennett J. imputed a $75,000 income to the husband. [^9]: 2019 ONSC 2492 at para 37. [^10]: Ibid, para. 34. [^11]: Entwistle v. MacArthur, 2007 17375 (SCJ - Ont. Fam. Ct). [^12]: Exhibit #14. [^13]: Revised Addendum, 2020 ONSC 2848. [^14]: 3664902 Canada Inc. v. Hudson’s Bay Co. (c.o.b. Bay Department Stores), [2003] O.J. No 950, 169 O.A.C. 283, 121 A.C.W.S. (3d) 453, 2003 26101, (Ont. C.A.) para. 21 (O.J.). [^15]: Yip v. HSBC Holdings plc, [2018] O.J. No. 3681, 2018 ONCA 626, 141 O.R. (3d) 641, 295 A.C.W.S. (3d) 885, 425 D.L.R. (4th) 594, 82 B’L’R’ (5th) 1, 2018 CarswellOnt 11405 at paras. 83 and 93 (O.J.). [^16]: Supra #9, at para. 30(c). [^17]: 2019 ONSC 1226, at para. 92. [^18]: See Toscano v. Toscano, 2016 CarswellOnt 13423, 2015 ONSC 5499, 257 A.C.W.S. (3d) 867, 67 R.F.L. (7th) 36, at para. 25 where Blishen J. noted that the wife in that case had made a number of unfounded allegations about the marriage contract in that case that had lengthened the trial process, and her testimony was not credible about the contract. [^19]: 2002 21768 (ON SC), 2002 CarswellOnt 4269, [2002] O.J. No. 4732, 119 A.C.W.S. (3d) 19, 45 C.C.L.I. (3d) 221 (Ont. S.C.). [^20]: ibid, para. 98.