COURT FILE NO.: 8657/08
DATE: 2020-12-08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JOANNE ELAINE VAN BOEKEL
Applicant
– and –
ERIC W. VAN BOEKEL
Respondent
Michael Nyhof, for the Applicant
Karon Bales and Katie Morris, for the Respondent
HEARD: December 9, 10, 11 & 12, 2019, March 10, 11, and 13, 2020 at Woodstock; written argument on costs completed November 12, 2020
HEENEY J.:
[1] Unsurprisingly, the parties have been unable to resolve the issue of costs. Indeed, both sides claim that they are entitled to an award of costs, and dispute who really won this lawsuit. It therefore falls to this court to decide the matter.
[2] The general principles to be followed in deciding the issue of costs in a family law proceeding were very helpfully summarized by Faieta J. in Negin v. Fryers, 2018 ONSC 6713, at para. 11:
In a family law proceeding, the award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as well as by the Family Law Rules, O. Reg. 114/99. The principles governing the award of costs were recently reconsidered by the Ontario Court of Appeal in Beaver v. Hill, 2018 ONCA 840 (Ont. C.A.), at paras. 8-13, and Mattina v. Mattina, 2018 ONCA 867 (Ont. C.A.), paras. 9-18, and can be summarized as follows:
• An award of costs under the Family Law Rules should promote the following purposes: (1) to partially indemnify successful litigants; (2) to encourage settlement, and; (3) to discourage and sanction inappropriate behaviour by litigants; (4) to ensure, in accordance with Rule 2(2), that cases are dealt with justly: Mattina, para. 10;
• While under Rule 24(1) there is a presumption that a successful party is entitled to their costs of the proceeding, Rule 24(4) provides that a successful party who has behaved unreasonably during a case may be deprived of all or part of the party’s own costs or ordered to pay all or part of the unsuccessful party’s costs. Rule 24(5) provides that whether a party has behaved unreasonably turns on: (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. Unreasonable behavior “in relation to the issues” includes behavior that: (1) is disrespectful of other participants or the court; (2) unduly complicates the litigation, (3) increases the cost of litigation: Beaver v. Hill, 2018 ONSC 3352 (Ont. S.C.J.), para. 51, rev’d 2018 ONCA 840 (Ont. C.A.) (but not on this point);
• A successful party is not entitled to its costs on a full recovery or “close to full recovery” basis (meaning 85% of full recovery costs) unless such result is expressly contemplated by the Family Law Rules, such as when a party obtains a result that is at least as favourable as its offer to settle (Rule 18(14)) or when a party has acted in bad faith (Rule 24(8)): Beaver, paras. 13, 17;
• Proportionality and reasonableness are the “touchstone considerations” to be applied in fixing the amount of costs: Beaver, para. 12;
• In setting the amount of costs, Rule 24(12) requires a court to 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.
• A party’s ability to pay costs is a relevant consideration in assessing the amount of costs payable only for the purpose of justifying a reduction, not an increase, in the amount of costs awarded: Beaver, para. 18;
• A claim for costs cannot include a risk premium that reflects the fact that counsel provided legal services while bearing the risk that they might ultimately not be fully paid for their services: Beaver, para. 7;
• The absence of an offer to settle cannot be used against a party in assessing costs unless it was realistic to expect an offer to settle to be made. Further, if an offer to settle that is not compliant with Rule 18 is made, it may be considered in assessing costs if it contains a “true element of compromise”: Beaver, para. 16; and
• An award of costs may be adjusted to reflect the parties’ divided success: Beaver, para. 21.
[3] The issue as to who was the successful party is an important one, given that Rule 24(1) provides that there is a presumption that the successful party is entitled to costs. I will, therefore, begin my analysis with that issue.
[4] At para. 14 of Negin, Faieta J. offers the following definition of “successful”:
A person is “successful” if he or she accomplishes an aim or purpose: See Concise Oxford English Dictionary, (12th ed. 2011) at p. 1439. Success is assessed by comparing the terms of the order made against the relief requested in the pleadings and, where applicable, against the terms of an offer to settle: C. (A.) v. K. (G.), 2015 ONCJ 399, 64 R.F.L. (7th) 496 (Ont. C.J.), para 17; Johanns v. Fulford, 2010 ONCJ 756, 15 R.F.L. (7th) 148 (Ont. C.J.), para 13.
[5] I will first look at the relief requested in the pleadings, as well as the relief requested in the written submissions following the conclusion of the evidence, as a barometer through which to measure success, before reviewing the various offers to settle that were exchanged.
[6] This was a motion to change the consent order made by Rady J. dated September 24, 2010. The relevant parts of that order were that the respondent would pay child support for the five children of the marriage in the amount of $5,444 per month. It is common ground that this was based on the respondent having imputed income from his hog farming business in the amount of $250,000 per year. He was also ordered to pay spousal support of $3,000 per month.
[7] The motion to change was commenced by the respondent in June, 2017. His aim or purpose, as reflected in his pleadings, was to convince the court that his income had dramatically decreased since the original order was made, such that he should be entitled to a retroactive reduction in child support, as well as the termination of his obligation to pay spousal support. He sought variation of retroactive and ongoing child support to the table amount payable on annual income of $118,320, as well as termination of spousal support effective May 1, 2017.
[8] He also sought variation of child support based on the fact that several of the children became independent at various points in time, so that support should be adjusted from time to time as the number of dependent children was reduced. This was never a controversial issue in this case, with the sole exception of a disagreement as to the precise date at which the oldest child MacKenna became independent (an issue that was ultimately resolved by me in the applicant’s favour). Indeed, the applicant consented to an interim order which terminated support for two of the children, and in her final submissions agreed that support for the second youngest child Lane shall terminate on June 30, 2020. The youngest child Tarynn remains dependent.
[9] The applicant defended against the respondent’s motion to reduce child support and terminate spousal support, and denied the allegation that his income had gone down. She asked for support to be adjusted in an amount “to be determined”, although that later crystallized into her position that the respondent’s income had increased dramatically from the income of $250,000 per year that formed the basis of the original order, such that both child support and spousal support should be retroactively increased.
[10] The applicant also asked in her pleadings that the original consent order with respect to equalization be set aside. However, that claim was dismissed, on consent and without costs, during the course of these proceedings, not long after the applicant’s present counsel, Mr. Nyhof, took over carriage of the file. Given that this dismissal was on a without costs basis, this claim has no relevance to my determination of the costs issue now before the court.
[11] The results sought by both parties in their pleadings were further refined in their written submissions following the conclusion of the evidence. At p. 37 of the respondent’s written submissions, he asked for a final order as follows:
That the applicant’s entitlement to support be terminated as of January 1, 2016;
In the alternative, that the applicant’s support be reduced to $700 per month, effective June 1, 2016;
That the applicant’s support for the period June 1, 2014, to December 31, 2015, be reduced;
That child support be retroactively varied to June 1, 2014, as per Scenario A in the Excel spreadsheet;
In the alternative, that child support be retroactively varied from June 30, 2015, as per Scenario A in the Excel spreadsheet;
That the applicant be required to repay the support overpayments.
[12] Scenario A, which was a spreadsheet filed with the respondent’s written submissions, provided a list of incomes for the respondent from 2014 to 2020, based on the cutting horse losses not being added back into income. It is not necessary to set them all out in detail, but it suffices to note that the figures amount to an average income of $112,059 per year. The respondent’s written submissions did not explicitly state the amount of ongoing child support that should be paid for Tarynn, but Scenario A shows that figure to be $915 per month, being the table amount for one child based on the respondent having annual income of $100,689.
[13] In the written submissions of the applicant following the conclusion of the evidence, she asked the court for the following relief:
That the respondent’s income shall be imputed at $500,000 per year and he shall pay child support based on that income;
That the commencement date for variation of child support shall be June 1, 2013;
That the parties' counsel may provide their calculations to determine the appropriate amount of arrears, taking into account the termination dates for the three now-independent children, and the amounts actually paid by the respondent;
That support for the child Lane terminate July 1, 2020;
That commencing July 1, 2020, the respondent shall pay support for the child Tarynn in the amount of $3,819, based on an imputed income to the respondent of $500,000 per year;
That the respondent shall pay to the applicant, in full satisfaction of spousal support arrears and ongoing spousal support the sum of $300,000, within 90 days. Pending payment in full the Respondent shall continue to pay $3,000 per month spousal support, deductible to him for taxes purposes and included in the Applicant's income for tax purposes.
[14] To clarify, the lump sum figure of $300,000 asked for by the applicant at the conclusion of her written submissions differed from the lump sum figure of $250,000 that she asked for in the body of her submissions. In my Reasons for Judgment, I held her to the lower figure.
[15] The result at trial, as reflected in my Reasons for Judgment released September 10, 2020, was as follows:
The respondent’s “available income” for the purpose of determining his ability to pay support was found to be $428,695 per year, based on his average income from 2015 to 2018 inclusive, with the cutting horse losses added back into income;
However, both parties had failed to prove a material change in circumstances from those which formed the basis for the 2010 order, since that order was based on imputed income of $250,000, not on “available income”. Since neither party had proven how the original figure of $250,000 had been calculated, they were unable to prove that a material change had occurred. Even if it was not possible to prove with precision how the original figure was arrived at, the parties could have had their experts calculate the respondent’s “available income” in 2010 (using the same methodology that they used to calculate his available income for 2015-2018), so that some comparison could be made between that income and the imputed figure, to assist in establishing a baseline for determining whether a material change had occurred from 2010 to the present time. They did not do so. In the end, I found that, given the cyclical nature of the hog business, it was still necessary and appropriate to impute income to the respondent, and that there was no basis for concluding that the quantum that was agreed to in 2010 is no longer appropriate. Accordingly, the respondent’s income for support purposes remained at the imputed amount originally agreed to by the parties, of $250,000 per year;
Child support was varied, based upon the dates at which the children became independent. This resulted in the following variations, all of which represent the table amounts payable for the remaining dependent children, based upon imputed income of $250,000 per year:
Varied downward from $5,444 per month to $4,822 per month, effective January 31, 2016, due to MacKenna becoming independent;
Varied to $4,051 per month, effective July 1, 2016, due to Peyton becoming independent;
Varied to $3,277 per month, effective December 1, 2018, due to Quinn becoming independent;
Varied to $2,019 per month for the remaining dependent child Tarynn, effective July 1, 2020, due to Lane becoming independent;
As child support payments were varied downward as children became independent, spousal support payments were varied upward, due to the synergy of child and spousal support, to an appropriate amount based upon imputed income of $250,000 per year, in accordance with the ranges suggested by the Spousal Support Advisory Guidelines. This resulted in the following variations, from the original order of $3,000 per month:
$3,500 per month, effective February 1, 2016;
$4,500 per month, effective July 1, 2016;
$5,000 per month, effective December 1, 2018;
$5,500 per month, effective July 1, 2020, subject to the order regarding lump sum spousal support;
In lieu of ongoing periodic spousal support, it was ordered that the respondent pay a lump sum of $250,000, within 90 days, in full and final satisfaction of his spousal support obligation. The periodic payments of spousal support paid from and after July 1, 2020 would be credited to the respondent toward this lump sum.
[16] It was left to counsel to calculate what overpayment or underpayment resulted from the above orders. The final order, as issued and entered, reflects counsel’s agreement that the respondent has underpaid for child support in the amount of $46,138, and underpaid for spousal support in the amount of $84,000. Accordingly, the total amount payable by the respondent to the applicant, for lump sum spousal support and arrears of child and spousal support, is $380,138. He is to be credited with any spousal support payments made since June 20, 2020.
[17] In comparing this result to the orders asked for by the respondent, both in his pleadings and in his written submissions at trial, it is clear that he has utterly lost this lawsuit. His available income for support has been found to be $428,695 per year, not $112,059 per year. While the figure imputed to him for support purposes has been held to $250,000 per year, that is still more than double the income figure he argued for.
[18] In Scenario A, the respondent calculated that the overpayment of child support that was due to the him was $103,750. The result at trial is that he has underpaid child support by $46,138, which is a net reversal of $149,888.
[19] In Scenario A, he calculated that the overpayment of spousal support due to him was $190,963. The result at trial is that he underpaid spousal support by $84,000, which is a net reversal of $274,963.
[20] He asked that the applicant’s entitlement to spousal support terminate as of January 1, 2016, or in the alternative, that it be reduced to $700 per month, effective June 1, 2016. Instead, support has been ordered to increase steadily from 2016 forward, as reflected in the arrears figure, and that future support from July 1, 2020 be satisfied by a lump sum payment of $250,000.
[21] With respect to the applicant, the results at trial were below what she had asked for in her written submissions. She asked that retroactive support be calculated on the basis of the respondent having income of $500,000 per year, whereas the figure imputed to the respondent was $250,000. She asked that ongoing support for Tarynn be the table amount based on income of $500,000 per year, while the result was that it will be based on income of $250,000. She did, however, successfully defend the respondent’s claim that child support should be retroactively reduced due to his alleged reduction in income.
[22] She also successfully defended the respondent’s claim that spousal support should be retroactively terminated or reduced, and was instead awarded steady increases in the amount of spousal support payable, as children became ineligible for child support. She was successful in receiving a lump sum award for future spousal support in the amount asked for in the body of her written submissions, of $250,000.
[23] It bears mentioning that the lump sum figure of $250,000 (or $300,000, depending upon whether one is reading para. 126 of the applicant’s Trial Submissions or the last page of those submissions) that the applicant was asking for was intended by her to include both future spousal support and spousal support arrears. In the final result, she received a lump sum of $250,000 for spousal support from July 1, 2020 forward, but also received arrears based on staged increases in spousal support since 2016, which ended up generating arrears amounting to $84,000. This was not an oversight, but rather recognized that her submissions amounted to a “package deal”. Her submissions had also asked for child support, both retroactive and ongoing, to be based on the respondent having income of $500,000. This was denied, and support was calculated based on the imputed income figure of $250,000 originally agreed to, for reasons explained in my Reasons for Judgment. However, having found as a fact that the respondent’s average available income was $428,695 per year, it was, in my view, entirely appropriate that he should, at the very least, pay an appropriate amount of spousal support that the SSAGs suggested he should be paying at his imputed income of $250,000, as the amount of child support changed from time to time. In other words, while spousal support was not based upon his available income, that income did make it clear he could well afford to pay support based upon his imputed income. The net result is that the applicant received less than she asked for in child support, but more than she asked for in spousal support.
[24] While the applicant failed to prove a material change in the respondent’s income in support of her Cross-Motion to Change, she was, clearly, “playing defence” in this case, and in that regard she was highly successful. She was able to resist the substantial reductions claimed by the respondent based on his alleged decreases in income, while essentially agreeing to necessary reductions in child support as children became independent. Those reductions were offset, in part, by appropriate staged increases in spousal support.
[25] In the end, the applicant will receive a total of $380,138 in arrears of child and spousal support and lump sum spousal support, instead of paying the respondent the sum of $294,713 he claimed to be entitled to. Furthermore, she is entitled to receive ongoing monthly support for Tarynn in the amount of $2,019 per month, instead of the amount proposed by the respondent of $915 per month. All of that can only be described as a victory for the applicant, and a loss for the respondent.
[26] The next step in the analysis is to compare the results at trial with the various Offers to Settle that were exchanged. I will deal with the applicant’s offers first.
[27] It is difficult to make an easy comparison between the offers and the result at trial, because the final order was relatively complicated, involving several variations in both child and spousal support over the period from February 2016 to the July 1, 2020, followed by lump sum spousal support. It also provides for the payment of ongoing support for the remaining child Tarynn. To facilitate a comparison, counsel for the applicant calculated the total amount of support that the respondent is required to pay under the order from February 2016 forward, and then compared that to the total amount he would have been required to pay under the various offers that were exchanged, had they been accepted and carried into effect. The payment of ongoing child support was projected out to June 30, 2022, which is the date Tarynn is expected to finish high school. The reason for the projection is that the offers of the parties differ on the quantum of ongoing child support, so projecting it for approximately two years affords a basis for comparison in the total amount ultimately paid. I find counsel’s overall approach to be a reasonable.
[28] The calculations are set out in detail in the applicant’s Reply Costs Submissions, and it is not necessary to repeat them here, except in summary form. These calculations correct certain errors that were made in the initial calculations in the applicant’s Trial Costs Submissions, which were identified in the Costs Submissions of the Respondent.
[29] The final order requires the respondent to pay total child support from February 1, 2016 to September 1, 2020 of $210,209, plus ongoing child support to June 30, 2022 in the further amount of $42,399. The order requires the respondent to pay total spousal support from February 1, 2016 to June 30, 2020 in the amount of $243,000, plus lump sum support in the amount of $250,000. Thus, the total support payable under the order from February 1, 2016 to June 30, 2022 is $745,608.
[30] In the applicant’s first offer referred to in her costs submissions, dated April 1, 2019, the total amount payable during that period would have been $730,568, which is roughly $15,000 lower than the result at trial. However, the offer included a provision for the payment of $25,000 in costs. I agree with Pazaratz J. in Chomos v. Hamilton, 2016 ONSC 6232, at para. 29, that an offer that includes costs obligations yet to be determined by the court cannot satisfy the strict requirements of Rule 18(14) of the Family Law Rules. The applicant concedes this point in her Reply submissions. Accordingly, it cannot be said that this offer would entitle the applicant to full recovery costs.
[31] It is also noteworthy that this offer proposed receiving $250,000 in lump sum support, in satisfaction of her claims for retroactive and ongoing support. As already discussed, in the final order she received periodic support up to June 30, 2020, and a lump sum of $250,000 for future spousal support thereafter. She therefore “beat” her offer as it concerns spousal support. However, she proposed in her offer that child support be calculated based on imputed income of $300,000, which is more than she was awarded at trial. Thus, while the combined amount of child and spousal support payable under her offer is less than the final order, the manner in which that total was arrived at is different. It cannot, therefore, be said that what she was awarded at trial was as favourable or more favourable than all of the component parts of her offer. This is an additional reason for concluding that her offer cannot satisfy the requirements of Rule 18(14).
[32] The applicant’s next offer was dated June 3, 2019 and was included in her Settlement Conference Brief. It would have required total payments during the specified period of $747,008. This is slightly higher than the amount payable under the final order, and also included a provision for costs of $45,000. While the proposal for spousal support was the same as in the previous offer, child support was calculated based on imputed income of $350,000.
[33] The applicant’s next offer was dated August 14, 2019. The total amount payable under it was $814,008, plus costs of $40,000. The proposal for lump sum spousal support was increased to $300,000 and child support was calculated on imputed income of $350,000. It is obviously much higher than the amount awarded at trial.
[34] Her next offer was dated November 5, 2019. It provided for total payments of $709,568, which is roughly $35,000 less than the result at trial, but once again provided for the payment of full indemnity costs if the offer was not accepted by November 8, 2019. This offer provided for lump sum spousal support of $200,000, plus retroactive child support of $100,000, plus ongoing support for the then two remaining dependent children based on imputed income of $300,000.
[35] The applicant’s next offer was served on December 11, 2019, after the trial had commenced. It would have required the respondent to make total payments of $616,903 during the period in question, which is considerably less than what was awarded at trial, but once again contained a provision for the payment of costs fixed at $100,000 if the offer was accepted by December 13, 2019, and full indemnity costs if accepted thereafter. This offer again proposed a payment of $300,000 in full satisfaction of her spousal support claims and retroactive child support claims. Ongoing support was based on imputed income of $350,000.
[36] The applicant’s final offer was dated February 6, 2020, during a hiatus in the trial. It would have required total payments of $764,946, and provided for no costs if accepted by February 20, 2020. If accepted thereafter, the respondent would have to pay the applicant her full indemnity costs. This offer provided two options. The first provided for the payment of a lump sum of $242,500 in satisfaction of claims for retroactive child and spousal support, plus the further sum of $108,000 as ongoing spousal support, payable at the rate of $3,000 per month for 36 months. The second option provided for the payment of $350,000 by way of an up-front payment of $175,000, plus 26 monthly payments of $6,730.77, in full satisfaction of retroactive child support and both retroactive and future spousal support. Child support for Tarynn was the table amount based on income of $290,000 under both options.
[37] It should be noted that there were two additional offers made by the applicant that were not referred to in the applicant’s costs submissions, and with respect to which no “total support payable” calculations were done. The first was dated September 10, 2018, and proposed setting the respondent’s annual income for support purposes at $750,000 per year, commencing January 1, 2011. The figure of $279,000 was claimed for the underpayment of spousal support up to September 1, 2018, payable at the rate of $5,000 per month. One does not need total support calculations to see that this offer was far in excess of the final order.
[38] The other offer made by the applicant which was not referred to in her submissions was dated October 16, 2019. It proposed payment of a lump sum of $250,000 for retroactive and ongoing spousal support. It proposed that child support be calculated based on income of $500,000, and that the respondent pay child support arrears of $95,000. It also demanded costs of $45,000. Since no calculation as to the total support payable under this offer was performed, it cannot be said with precision how it compared with the result at trial. It can be said that she received more in spousal support at trial than she offered, and less in child support.
[39] I will now consider the respondent’s Offers to Settle.
[40] The respondent’s first offer was dated November 22, 2017. It would have required the respondent to make total payments of $396,819 during the period in question. It provided for child support to be payable based on imputed income of $250,000. With respect to spousal support, it was to be reduced to $2,199 per month commencing October 1, 2016, and terminated entirely on November 30, 2019. Clearly, this is well below the total amount of $745,608 payable under the final order.
[41] Even worse was the next offer, dated March 9, 2018. It would have required total payments during the period in question of $225,437. It provided for child support commencing October 1, 2016 to be based on imputed income of $102,000, to be increased on October 1, 2017 to the table amount based on imputed income of $118,320. Spousal support was to be reduced to $1,135 as of October 1, 2016, and terminated entirely on November 30, 2019.
[42] The respondent’s next offer was dated June 28, 2018, and dealt with settlement of the issue of child support only. Once again, it proposed paying child support commencing October 1, 2016 based on imputed income of $102,000, increasing on March 1, 2018 to the table amount based on imputed income of $118,320. It is obviously far less than what was awarded to the applicant at trial.
[43] The respondent’s next relevant offer was dated December 19, 2018, and contained two options, A and B. Under Option A, the respondent would have been required to make total payments of $333,969. Child support under that offer was to be based upon the respondent having annual income of $125,000. Spousal support was to be a lump sum of $50,000.
[44] Under Option B, total payments of $305,000 would have been required. Child support was the same as Option A, but spousal support would be $1,200 per month commencing February 1, 2018, and terminating with a final payment on January 1, 2022. Under both options, any claim for overpayment of child and spousal support up to January 31, 2019 was to be waived by the respondent.
[45] The respondent’s next offer was contained in his Settlement Conference Brief and is dated June 12, 2019. It would have required total payments during the specified period of $364,893. It provided for child support to be based on his annual income being set at $135,000 for the years 2015 to 2018 inclusive. He agreed to waive any overpayment of child support, which he calculated to be $23,307. Spousal support was to be $1,392 per month, and again the respondent agreed to waive any overpayment of spousal support, which he calculated to be $74,172.
[46] The respondent’s next offer was dated August 14, 2019. The total amount payable under that offer would have been $369,609. There were no significant changes in the terms of this offer from that of June 12, 2019.
[47] The respondent’s final offer was dated November 5, 2019. The first term withdrew all other Offers to Settle. The offer would have provided for total payments of $433,685 during the period in question. Child support was to be based on the respondent having annual income of $150,000. Monthly spousal support was to be $2,077. Overpayments of child and spousal support, calculated by the respondent to be $54,927 and $65,696, were to be waived. It provided for no costs if accepted by 9 a.m. on November 12, 2019; $25,000 in costs payable by the applicant if accepted after that date but before 5 p.m. on November 15, 2019; $75,000 in costs payable by the applicant if accepted after that date but before 5 p.m. on November 29, 2019; and, $100,000 in costs payable by the applicant if accepted thereafter.
[48] Using the Offers to Settle as a barometer of success, I conclude that the applicant has been the successful party. All but one of the six offers dealt with in her costs submissions were within the “ballpark” of the final order, in terms of the totality of support to be paid. Three of her six offers would have required the respondent to pay less total child and spousal support than was ordered, without considering costs. A fourth only exceeded the total amount payable under the order by $1,400, and a fifth by $19,378.
[49] Of the two offers that were not dealt with in her costs submissions, the one dated September 10, 2018 exceeded the amount awarded at trial with respect to both spousal support and child support. I consider this offer to be an outlier, and its terms were not carried forward into her other offers, all of which were subsequent so this one. As to the October 16, 2019 offer, I have already observed that she received more spousal support but less child support in the final order than this offer provided for.
[50] In terms of the component parts of the offers dealt with in her costs submissions, child support was proposed to be set with the respondent’s income ranging from a low of $290,000 to a high of $350,000, which is higher than the amount fixed by my order of $250,000. However, that position is not entirely unreasonable on the evidence, given my finding that the respondent had available income for support of $428,695 per year. Where the applicant was unsuccessful was in failing to satisfy the legal requirements of proving a material change of circumstances from an order that was based on imputed income.
[51] With respect to spousal support, though, her offers were all less than what she was awarded at trial. Taken together, her total award at trial for child and spousal support was better than three of her offers (without considering costs) and very close on two of the others.
[52] The respondent, on the other hand, has been shown to be wholly unsuccessful when his offers are compared to the results at trial. All of his offers are far below what was ordered. His best offer set his total support obligations at $311,923 below the result at trial, and his worst offer set those obligations at $520,171 below that result. Only his first offer proposed setting his income for support purposes at the figure ordered at trial, $250,000, but it was coupled with a spousal support proposal that was far below what was ordered, as was every other spousal support proposal he made. The rest of his offers proposed paying child support at incomes ranging from $102,000 to $150,000 per year.
[53] The respondent argues that the applicant’s calculations as to total support payable are faulty, because they do not take into account the income tax implications that apply to their respective offers. The applicant primarily offered to deal with spousal support by way of lump sum payments, which are not taxable in her hands nor deductible by the respondent, whereas he primarily proposed paying periodic support, which is deductible by him and taxable income in the hands of the applicant. While this is arguably a valid point, it makes no practical difference because the gap between their respective settlement positions, and the gap between the respondent’s offers and the result at trial, is so wide. Furthermore, the respondent historically has organized his affairs such that he declares very little taxable income, so a tax deduction to him is not of great significance. The applicant states that she will have tax-deductible legal fees arising from these proceedings, which could reduce or eliminate any tax liability from retroactive spousal support, so the tax treatment of the support payments is not of great significance to her either.
[54] The respondent also argues, at several points in his costs submissions, that the applicant’s Offers to Settle do not contain a true element of compromise. This is non-sensical. Every proposal she made on support represents a compromise from a proposal for a higher amount. The concept of the “lack of an element of compromise” arises in situations where, for example, one party offers to settle on the basis that the other side completely abandons their claim or their defence. It does not arise here, where concrete numbers, from among a wide range of possible numbers, are proposed to settle the issues at stake.
[55] While I find that none of the applicant’s offers qualify under Rule 18(14) as entitling the applicant to full recovery costs, Rule 18(16) states that I am entitled to take any written offer into account in exercising my discretion over costs, even if subrule (14) does not apply. Furthermore, Rule 24(5) provides that the reasonableness of offers made shall be considered by the court in deciding whether a party has behaved reasonably or unreasonably.
[56] In my view, the applicant’s Offers to Settle demonstrate that she was acting very reasonably in her settlement position throughout, with two isolated exceptions. The respondent’s offers, on the other hand, demonstrate that he was being consistently unreasonable regarding settlement. The gap between his offers and the result at trial is enormous, making it clear that he bears primary responsibility for the fact that this case did not settle. Had he taken a reasonable approach to settlement, and accepted the applicant’s offer of December 11, 2019, he would have ended up paying $28,705 less than the final order requires him to pay, even after paying the costs of $100,000 that the offer demanded. That would have meant that he would not now be facing a significant costs award on top of that, and at the same time he would have saved himself the costs he incurred with his own counsel, in completing the trial, preparing written submissions at trial, and preparing written submissions on costs. As will be seen below, those costs were substantial. In short, his decision not to settle was a disastrous one for him. It was a disaster because he lost.
[57] Despite all of the above, the respondent argues that he was successful on 70% of the issues at trial which accounted for the majority of the evidence, and therefore should be awarded 70% of his costs. His score card on these issues can be summarized as follows:
Has a material change in the respondent’s imputed income been proven? Neither party was successful;
Was the cutting horse activity a hobby or a business? Applicant was successful;
Should cutting horse losses be attributed in years when the corporation suffered a loss? Respondent was successful;
Should cutting horse losses be grossed up for income tax? Respondent was successful;
Should banking covenants serve to cap the respondent’s income at $150,000 per year? Respondent argues that success was divided, but I disagree. Bank covenants were held to have no impact on the final order, since he would have been required to pay no more periodic support than he had been paying all along. Applicant was successful on this issue;
Should travelling expenses be attributed to the respondent? Respondent was successful;
Should legal and accounting fees be attributed to the respondent? Respondent argues that he was successful, but I disagree. A ruling was unnecessary because these expenses were incurred in years when the corporation suffered a loss. The result is neutral;
Should income be attributed from the capital dividend account? Respondent was successful;
Should income be attributed from Van Boekel Holdings Inc.? Respondent was successful;
What is respondent’s current net worth? Applicant was successful in establishing both that the respondent’s net worth was roughly $23 million, instead of the roughly $13 million argued for by the respondent, and that his net worth was a relevant consideration relative to his means to pay support;
Has the applicant’s income of $0 per year materially changed? Respondent argues that he was successful, but I disagree. The applicant agreed with the respondent’s proposal that her income should be fixed at $25,200 going forward, and that is the ruling that was made. This issue is neutral;
When was MacKenna independent? Respondent argues that he was successful, but I disagree. He argued for a date of June 30, 2015, while the applicant argued for February 1, 2016. I ruled in favour of the applicant, so she was successful;
Is the respondent liable for retroactive s. 7 expenses? This issue was raised during the trial, but abandoned in argument, so the respondent was successful.
[58] In her Reply submissions, the applicant takes issue with this analysis, and points out that the respondent fails to mention the fact that the applicant was successful in obtaining lump sum spousal support, an award that the respondent opposed. Given the fact that it amounted to $250,000, it was an issue of major significance in the overall disposition of this case.
[59] Assuming for the sake of argument that allocating costs on a percentage basis relative to success on every issue is an appropriate way to analyze success and apportion costs, the count is not 70% in the respondent’s favour, but is instead 6 issues in the respondent’s favour, 5 issues in the applicant’s favour, and 3 issues neutral.
[60] However, in my view, on the facts of this case it is misguided to simply count up the issues and allocate costs based on the percentage of issues that either party won, because not all issues have the same importance or impact on the final result. The single most important issue was whether the cutting horse losses should be attributed to the respondent. I ruled in the applicant’s favour, finding that this was a hobby and not a business, such that that those losses should be attributed as income to the respondent. This resulted in a finding of fact that the respondent had average income of $428,695 per year available to him from 2015 to 2018 inclusive, from which he could pay support. But for that finding, the respondent’s average income for those years would have been $108,319.
[61] This single finding was virtually determinative of the case. While income of $250,000 was ultimately imputed to the respondent for support purposes, being the amount the parties originally agreed to impute to him, the finding that the respondent had available income of $428,695 remained crucially important, because it demonstrated that the respondent could still afford to pay support at the agreed-upon income level of $250,000. At para. 203 of my Reasons, I referred to Trang v. Trang, 2013 ONSC 1980 where, despite the fact that the payor’s case suffered from the same inability to prove how the original amount of imputed income had been calculated, a variation was nevertheless necessary because the payor had been rendered unable to pay support due to injuries sustained in a car accident. The finding here as to the respondent’s available income alleviated any concern in that regard.
[62] The second most important issue was the ruling that bank covenants did not operate so as to cap the respondent’s income at $150,000 per year. Had the respondent been successful on that issue, his average available income for 2015 to 2018 would have been $119,127, not $428,695. The applicant won that issue.
[63] The other sub-issues relating to a determination of the respondent’s available income had no impact on the result. Grossing up the cutting horse expenses, and adding them to the respondent’s income even in years when the corporation suffered a loss, would only have served to increase the respondent’s average income from $428,695 to a higher number. This would have had no impact on the result because the respondent’s income was held to the imputed figure of $250,000. The same can be said for all of the other sub-issues regarding travelling expenses, professional fees, attribution of income from Van Boekel Holdings and from the capital dividend account. They would have served to increase the respondent’s available income had the applicant been successful, but that would not have affected the final result. Thus, they were victories for the respondent without any favourable consequences.
[64] In short, the respondent won several battles, but he lost the ones that counted, and thereby lost the war. While that would entitle the respondent to some modest discount in the costs payable by him relating to the time wasted at trial on these issues, they do not entitle him to receive an award of costs.
[65] The respondent alleges that the applicant engaged in unreasonable conduct and that her counsel was unprepared throughout these proceedings. He first points to the claim she made to set aside the 2010 order regarding equalization. I have already ruled that this claim is irrelevant to the present costs issue, since it was previously dismissed on consent without costs.
[66] The next complaint is that the applicant pursued a claim that one of the respondent’s corporations, Just E Farms, had undisclosed income. The basis for that claim was that the feed costs per hog were much higher than normal, leading to the theory that more hogs were being raised and sold than had been claimed. This claim was abandoned by applicant’s counsel during the course of the examination in chief of the respondent’s expert, James Hoare. From his evidence, and from the other evidence tendered by the respondent, it had become clear that the feed supplier, Kalmbach Feeds, was owed money from prior years and was not just a supplier but had become also a creditor. The apparently high payments made to Kalmbach were due to the fact that they went toward payment of outstanding debts as well as toward feed.
[67] The applicant states that they had requested disclosure of the Kalmbach Feeds contract from the respondent but that request was refused. The explanation for the higher than normal feed expenses did not become clear until evidence was adduced at trial, and once that was done, the claim was abandoned. I accept this submission.
[68] The next complaint relates to the applicant’s claim for retroactive s. 7 expenses. It was advanced by the applicant in counsel’s opening statement, but the respondent was not cross-examined on it. The applicant filed briefs of s. 7 expenses as exhibits, but gave very little evidence on the issue, and no claim for those expenses was made in her closing submissions. I concluded that she had abandoned that claim.
[69] The applicant’s response to this complaint is that dealing with a claim for s. 7 expenses can be a very time-consuming process, and in the bigger context of this case the decision was made to abandon that claim. I do agree that reviewing s. 7 expenses line by line is a time-consuming process, and would not have been a cost-effective use of trial time. By abandoning it, the applicant probably shortened the trial by at least one day. However, there should still be some modest discount in costs for having raised the issue at all, only to ultimately abandon it.
[70] A similar situation arose with respect to the respondent’s travelling expenses, where it was alleged that travelling expenses put through the corporation actually related to personal expenses, and should be attributed to the respondent. As I ruled in my Reasons for Judgment, the applicant failed to support this claim with any evidentiary basis, and it was rejected. Once again, some discount in allowable trial time should result from this, but not much since it did not consume a great deal of time.
[71] The respondent complains about other time spent by the applicant at trial questioning intercorporate transfers without invoices, construction costs for his house, other personal expenses paid by the corporation, a 2012 sale of farm land said to be held in trust for the corporation, and so on. It is alleged that disclosure was repeatedly requested of documents that had already been disclosed. All of this is alleged to have been a waste of time. If it was, though, I am of the view that the cause of this waste had more to do with the manner in which the respondent chose to organize his affairs than it did with applicant’s counsel attempting to unravel those affairs. Van Boekel Hog Farms Inc. was entirely the alter ego of the respondent. The corporation owned the house he lived in and the vehicles he drove. All of his living expenses were paid either directly by the corporation or through a company credit card. The respondent had neither his own personal credit card nor even his own personal bank account. His method for separating personal expenses from corporate ones was to personally review the corporation’s monthly credit card statements, and tick off the entries that were personal – a suspiciously self-serving way of doing things. He owned a series of inter-related corporations where money and transactions flowed among them, which added to the complexity of his financial affairs. The respondent’s financial disclosure and other documentation filled several banker’s boxes. The applicant faced an almost overwhelming task trying to sort out the respondent’s true financial picture, and if some time was wasted in the process neither she, nor her counsel, should be faulted for it.
[72] A series of other allegations were made of the applicant’s counsel missing deadlines, not complying with the Rules, and generally being unprepared. I regard these as nitpicking complaints, that had no real impact on the conduct of this proceeding. While mistakes were made by applicant’s counsel, and positions were changed from time to time during the course of the trial, it must be remembered that this was an extremely complex trial. The respondent’s counsel was, on the evidence, paid through his corporation. Ms. Bales had the benefit of junior counsel, Ms. Morris, who carried a significant portion of the load. That was evident in the many volumes of legal memoranda that were filed by the respondent during the trial on practically every legal issue imaginable. Mr. Nyhof, on the other hand, was on his own in court. The applicant herself served as his assistant, in order to save costs. It was, in a sense, a David and Goliath scenario, where the respondent, with a net worth of $23 million, was able to run an organized, almost painfully thorough and well-financed case, while the applicant, with a negative net-worth, who was facing bankruptcy if she lost the trial, did the best she could with limited resources.
[73] I find no merit in the respondent’s allegations that the applicant conducted herself unreasonably.
[74] The applicant, for her part, alleges that the respondent was unreasonable or demonstrated bad faith in the manner in which he conducted this litigation. He did not comply with the annual financial disclosure term in the final order from 2010. He did provide disclosure in 2013 when it was demanded from him by counsel for the applicant, but he had not done so before then, nor did he do so in the years that followed. His explanation is that he was not aware of his obligation under the order to provide disclosure. I do not accept this explanation. He clearly is able to read English, and the disclosure obligations are clearly set out in para. 9 of the 2010 order.
[75] He also unilaterally reduced his child support obligation in 2016 by reason of the fact that two children had become independent. However, he reduced it to 3/5ths of the amount payable for 5 children, which is less than the table amount. When he was advised of this by the applicant, he refused to change it, which led to the order being filed with the Family Responsibility Office for enforcement.
[76] As noted in my Reasons for Judgment, the respondent retained counsel who wrote to the applicant on March 20, 2017 to ask her to agree to a variation of the order. She retained counsel, Ms. Hankali, who replied on her client’s behalf on April 10, 2017, advising that she had been consulted with regard to his letter. She wrote: “Before I can adequately advise my client, I would be required to obtain Mr. Van Boekel’s complete financial disclosure for the last three years. Please advise when you would be able to provide my office with same.”
[77] Instead of providing that disclosure – disclosure he was legally obligated to provide – and then seeing if the matter could be resolved amicably, the respondent issued his Motion to Change. That set in motion this bitterly contested lawsuit that has consumed well over $700,000 in total legal fees to date.
[78] The applicant complains that the respondent refused to answer many relevant questions on his cross-examination, and refused to provide relevant documentary disclosure. However, those complaints were dealt with on a motion before Templeton J. While she found merit to some of the claims, she ultimately concluded that success was divided, and ordered no costs. In view of that ruling, this allegation of non-disclosure or obstructive behavior is no longer relevant.
[79] While the respondent was guilty of non-disclosure up to the commencement of these proceedings, and conducted his case in a manner that could be considered as “playing hardball”, I am not persuaded that he has engaged in bad faith, nor conducted himself so unreasonably as to warrant an order for full recovery costs under Rule 24(8). “Bad faith” generally involves dishonesty, or knowingly acting in some improper manner: Rashid v. Shaher, 2011 ONSC 852 at para. 35. That has not been established here. I am, however, satisfied that, as the unsuccessful party, the respondent should pay costs to the applicant on a partial recovery basis. What remains to be determined is the quantum of those costs.
[80] In setting the amount of costs, Rule 24(11) sets out a series of factors to consider. The first is the importance, complexity or difficulty of the issues. The issues were of paramount importance to the applicant. She was almost totally dependent on the support she was receiving, and was having difficulty paying her bills on what was coming in. It was of the utmost importance to defend the respondent’s efforts to reduce or terminate her support.
[81] The case was extremely complex, which is reflected in the fact that my Reasons for Judgment required 253 paragraphs over 52 pages to decide it. Counsel do not suggest otherwise.
[82] I have already considered the reasonableness or unreasonableness of each party’s behaviour.
[83] The remaining factors relate to the lawyer’s rates, the time properly spent on the case, and whether expenses were properly paid.
[84] The applicant asks for costs of the trial fixed at $318,000 inclusive of disbursements and HST. The breakdown is as follows:
Account from Selene Hankali, Barrister and Solicitor, previous counsel (drafting pleadings and attending on refraining motion) $5,000
Michael Nyhof, counsel, 25 years at the bar, practicing exclusively family law: 513.3 hours @ $395 $202,753
Kristal McIlmoyle, senior law clerk, 57.8 hours @ $120 $6,936
HST on fees $27,260
Disbursements including HST $15,991
MDD Forensic Accounting $14,232
Davis Martindale Advisory Services $59,732
Subtotal: $331,904
Less: credit for payment by respondent per order of Hebner J. $12,366
Net costs: $319,538
[85] Mr. Nyhof’s dockets, appropriately, do not include time spent on the motion before Templeton J. A separate bill of costs was submitted relating to the time spent on dealing with the issue of costs, and that will be discussed later.
[86] The respondent in his submissions on costs appears to take no issue with the time spent by counsel, the hourly rates charged, nor the disbursements incurred. This is not surprising, given the time spent and hourly rates charged to the respondent, as reflected in the Respondent’s Bill of Costs. Ms. Bales, with 41 years at the bar, billed out at a partial indemnity rate of $450 per hour, substantial indemnity rate of $600 per hour and full recovery rate of $750 per hour. Her junior counsel Ms. Morris billed out at rates ranging from $156 to $285 per hour. A total of 797 hours were spent on this case, not including the time spent dealing with the costs issue. Had the respondent been entitled to receive a costs award, his Bill of Costs claimed partial indemnity costs of $311,552, substantial indemnity costs of $399,633 or “Actual Rate” costs of $487,722. Disbursements of $47,276 were included in each of those claims.
[87] Given that Mr. Nyhof spent 284 hours less than counsel for the respondent, it could hardly be argued that his docketed time was excessive. The hourly rates charged are, in my view, reasonable. The disbursements, although high, are reasonable, since this case was highly dependent on expert evidence.
[88] The costs claimed by the applicant of $318,000 represent full indemnity costs, but the applicant is entitled to partial indemnity costs only. In my view, an award of costs in the amount of $200,000 inclusive of HST and disbursements, represents a fair and reasonable amount for the unsuccessful party to pay in costs. It reflects a modest discount for the time wasted at trial on issues that were lost or abandoned. It is not disproportionate to the amount in dispute, since the trial resulted in the applicant receiving an award of lump sum support and arrears in the amount of $380,138, along with an increase in the ongoing support for the remaining dependent child. It is also within the reasonable expectations of the respondent as to what he might be required to pay in costs if he was unsuccessful, given his awareness of what he was paying his own counsel.
[89] The applicant also claimed costs of $20,000 related to the costs issue itself. Mr. Nyhof spent 42.9 hours at $395 per hour, for total counsel fees of $19,148.42, including HST. His law clerk spent 9.4 hours, resulting in total fees of $1,274.64.
[90] Once again, these fees seem reasonable compared to what the respondent was claiming. A total of 75.95 hours was spent by counsel preparing the Respondent’s Costs Submissions.
[91] The applicant was completely successful on the issue of costs. In my view, a fair and reasonable amount for costs related to the costs issue, on a partial indemnity basis, is $13,000 inclusive of HST.
[92] Accordingly, an order will go that the respondent will pay to the applicant her costs of this action fixed at $213,000.
[93] There is a remaining issue relating to prejudgment and postjudgment interest. The applicant claims prejudgment interest on her costs award, on the basis that she had to use her line of credit to finance the litigation, and is also liable to pay interest on overdue accounts from her expert witness. The simple answer to this claim is found in s. 128(4)(c) of the Courts of Justice Act, R.S.O. 1990, Chap. C.43, which provides that prejudgment interest shall not be awarded “on an award of costs in the proceeding”.
[94] As to postjudgment interest, I am not persuaded that a case has been made, relative to the factors set out in s. 130(2) of the Act, for me to exercise my discretion under s. 130(1)(b) to allow interest at a higher rate than prescribed. Postjudgment interest will run at what I am advised is the prescribed rate for the fourth quarter of 2020 of 2% per annum.
[95] Finally, the applicant requested an order that she be permitted to return the issue of enforcement to this court before me (if I am available), to seek an order vesting property owned by the respondent or one of his corporations in the applicant’s name, in order to enforce the judgment against the respondent. I am not persuaded that such an order is necessary or proper at this time. Indeed, if the support order is filed with the Family Responsibility Office, as I understand it to be, the Director, and not the applicant, has exclusive power to bring enforcement proceedings: see s. 6(7) of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31.
[96] I will, however, grant an order as requested that the costs awarded herein are all in respect of support, and may be enforced as such.
T. A. Heeney J.
Released: December 8, 2020
COURT FILE NO.: 8657/08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JOANNE ELAINE VAN BOEKEL
Applicant
– and –
ERIC W. VAN BOEKEL
Respondent
REASONS FOR JUDGMENT ON COSTS
Heeney J.
Released: December 8, 2020