Court File and Parties

COURT FILE NO.: FC-11-320-1 DATE: 2021/01/07 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: RACHELLE O’CONNOR, Applicant AND GIUSEPPE MERLO, Respondent

BEFORE: The Honourable Justice D. Summers

COUNSEL: Applicant is self-represented Rebecca Rosenstock, for the Respondent

HEARD: In Writing

Costs Endorsement

Overview

[1] This costs decision arises out of a four-day trial followed by written submissions. The trial focused almost exclusively on parenting and support issues related to the parties’ 11-year-old son.

[2] Each party seeks costs and argues they were more successful than the other, both at trial and based on their offers to settle. The applicant, Ms. O’Conner, represented herself at trial and does so now in these submissions. She does not say how much she seeks to recover in costs however, she calculates substantial indemnity at $6,148.95 and partial indemnity at $4,219.11 based on a total account of $6,792.23. In the alternative, Ms. O’Connor asserts that success was divided, and each should bear their own costs. Finally, she argues that if I find Mr. Merlo entitled to costs, the amount should be reduced. She speculates that he was represented on a Legal Aid certificate and says any recovery should be based on those rates and not counsel’s regular hourly rate.

[3] Mr. Merlo seeks costs of $33,942.74 based on a total account of $34,632. His calculation reflects substantial indemnity costs of $6,279.29 at a rate of 90% to the date of his offer and thereafter, full indemnity costs of $27,663.45. Mr. Merlo further argues that if I find Ms. O’Connor was more successful or that success was divided, he should nevertheless be awarded full recovery costs. He says her behaviour was unreasonable and at times rose to the level of bad faith. Finally, Mr. Merlo asks that any cost award to him be set-off in an amount up to $15,000 against the child support arrears owed to Ms. O’Connor.

[4] As I will explain, I find that success was divided, and each party should bear their own costs.

General Legal Principles

[5] The following legislation and legal principles apply to all cost awards in family law.

• Costs awards are discretionary. Section 131(1) of the Courts of Justice Act [1] states that subject to the provisions of an Act or rules of court, the costs of a proceeding or a step in a proceeding are in the discretion of the court and the court may determine by whom and to what extent the costs shall be paid.
• Reasonableness and proportionality are the “touchstone considerations” that guide the court’s discretion in fixing the amount of costs. [2]
• The court must have regard to what is a fair and reasonable amount to be paid by the unsuccessful party considering the circumstances in the particular proceeding, rather than any exact measure of the actual costs to the successful litigant. In deciding what is a fair and reasonable amount, the expectation of the party required to pay costs is a relevant factor. [3]
• Modern costs rules are designed to foster four fundamental purposes (1) to partially indemnify successful litigants; (2) to encourage settlement; (3) to discourage and sanction inappropriate behaviour by litigants; and (4) to ensure that cases are dealt with justly under subrule 2(2) of the Family Law Rules. [4]

Success

[6] The starting point in a costs analysis is to determine success. [5] Rule 24(1) of the Family Law Rules [6] states that a successful party is presumptively entitled to costs. However, where success is divided equally or the court is unable to determine who the successful party is, rule 24(6) allows the court to reduce the costs award or award no costs to either party.

The Relief Sought at Trial

[7] Ms. O’Connor sought orders for sole custody and primary residence. Mr. Merlo did not contest primary residence but argued for joint custody. I found that the parties were well beyond the point of overcoming their personal animosity in order to communicate effectively for the sake of their child and awarded Ms. O’Connor sole custody and decision-making authority. Although I found that both parties were at fault for their toxic and dysfunctional parenting relationship, I was concerned that an order for joint custody carried the risk of increasing the conflict already present in the child’s life. However, out of concern that Ms. O’Connor would continue to exclude Mr. Merlo from important information and participation in the child’s life, I also ordered that she must consult with Mr. Merlo, consider his opinion before making any significant decision, and thereafter, promptly advise him of the decision made. Although the outcome on this issue was somewhat more favourable to Ms. O’Connor, I nevertheless find that success was divided.

[8] Access had been a longstanding problem between the parties. Each blamed the other. Initially, Ms. O’Connor argued that access should be reduced to 6 hours on alternate weekends and exercised on either Saturday or Sunday. She then reconsidered and mid-trial proposed that the current schedule continue in accordance with the 2014 order of Labrosse J. with the added requirement that Mr. Merlo confirm access by 9:00 p.m. the night before. Labrosse J.’s order provided interim access every weekend on Saturday and Sunday between 10:00 a.m. and 4:00 p.m. In addition, Ms. O’Connor sought terms that drop-off take place at Chapters in Ottawa’s Byward Market and that pick-up be done at Chapters in the east end of the city. She proposed a term stipulating that Mr. Merlo would forfeit his access if, without notice and reasonable explanation, he was more than 20 minutes late. She argued that summer vacation should occur for one week in July and one week in August, during the day only, with the weeks to be chosen by June 1 in each year. For Christmas, Ms. O’Connor sought an order that access take place before or after Christmas Day. Finally, she asked the court to include a term that access not interfere with the child’s athletic and social activities.

[9] Mr. Merlo sought a schedule that provided access on the first, third and fourth weekend each month, on Saturday from 9:00 a.m. until 4:00 p.m. and from Sunday at 10:00 a.m. until Monday morning when he would take the child to school. He proposed that pick-up take place at Ms. O’Connor’s residence and if the child was returning to her residence after access, she would do the pick-up at his residence. Mr. Merlo proposed that holidays be shared and said he would take the child to his scheduled activities during his parenting time.

[10] The terms of my access order were not as limited as Ms. O’Connor wanted, nor as generous as Mr. Merlo wished. Overall, I regard Mr. Merlo as more successful on this issue. I found it was in the child’s best interests to include overnight access. My order provides for parenting time on the first, third and fourth weekends every month when Mr. Merlo shall have the child in his care from Sunday at 10:00 a.m. until Monday morning when he returns to school. If Monday is a statutory holiday or a professional development day, access is extended to Monday at 7:00 p.m. I found this schedule maximized contact between Mr. Merlo and the child in a way that took account of Mr. Merlo’s evening work schedule and his days off. It further minimized contact between the parties. I also found it was important for the child to share special holidays and March Break with both parents and ordered two consecutive weeks with Mr. Merlo every summer.

[11] Ms. O’Connor sought to impute income to Mr. Merlo. She did not say in what amount nor provide any evidence aside from hundreds of pages of bank statements without any analysis. Although I found no acceptable reason for Mr. Merlo’s unemployment or underemployment during the years in question, I did not impute income to him beyond the annual amount of $30,000 that he had consented to since 2012 for purposes of the interim support orders made. For 2019, based on his evidence indicating income fluctuations, I found Mr. Merlo’s income to be $40,000. On this issue Mr. Merlo was successful.

[12] Ms. O’Connor sought retroactive child support and s.7 expenses effective 2008 but did not present any evidence to support these claims, therefore, she cannot claim success on this issue. With respect to ongoing support, Mr. Merlo’s position at trial was general insofar as he said he would pay support based on his income and s. 7 expenses in proportion to income. He did not indicate when support should commence. I ordered $359 per month effective January 1, 2019 based on my income finding of $40,000. For 2019 only, I also ordered that Mr. Merlo pay $117 per month as his contribution to s. 7 expenses. Effective January 2020, they were to be shared in proportion to income. On this issue, I find that success was divided.

[13] Ms. O’Connor was successful in her claim to set aside Justice Sheard’s 2017 order rescinding child support arrears. This was one of the more significant financial issues insofar as the arrears were in the range of $11,000.

[14] I did not order that Ms. O’Connor could obtain the child’s passport or to travel with him without Mr. Merlo’s consent as she sought. Nor did I make a restraining order. Mr. Merlo was successful on these latter two issues, however, neither attracted much trial time.

[15] Overall, I find success at trial was divided. I now turn to consider the Offers to Settle.

Offers to Settle

[16] Both parties claim the benefit of Rule 18(14) [7] and say that their offers were as favourable or more favourable than the outcome at trial. I disagree. Neither party bested their offers. Nevertheless, I consider the terms of their offers under rule 18(16) [8] that says the court can consider any written offers and the date made when exercising its discretion over costs even if subrule (14) does not apply. [9]

[17] Ms. O’Connor made only one offer to settle dated August 1, 2018. It was non-severable as was Mr. Merlo’s offer, an unfortunate decision for each party. This was a case that lent itself to offers that were presented in severable parts.

[18] Ms. O’Connor’s offer proposed that she have sole custody, authority to obtain travel documents for the child and to travel with him without Mr. Merlo’s consent. Mr. Merlo’s offer used the language of decision making rather than custody. The essential terms of his proposal required that Ms. O’Connor consult him prior to making decisions, however, she would have the right to make the final decision if they did not agree. In this regard, his offer was more in line with my order than Ms. O’Connor’s.

[19] With respect to access, Mr. Merlo’s offer was closer to my order in more ways than Ms. O’Connor’s offer. She proposed only six hours of access every second weekend on either Saturday or Sunday subject to police enforcement. If Mr. Merlo was more than 20 minutes late, he forfeited his access for that day as well as the next scheduled visit. The schedule proposed in Mr. Merlo’s offer mirrored his position at trial. Other aspects of his offer on access were similar to my order insofar as he provided for pick up at Ms. O’Connor’s residence, he agreed that he would be responsible for access related transportation costs and would not drive with the child in his vehicle if his license had been suspended. This later term was also part of Ms. O’Connor’s offer.

[20] Ms. O’Connor’s offer did not address holiday access whereas Mr. Merlo’s proposed a schedule to share all holidays equally including a specific schedule for the period between December 24 and 26th each year. In this regard, there were few differences between the terms of his offer and my order.

[21] Ms. O’Connor enjoyed greater success on the child support issues. I set aside Justice Sheard’s order that rescinded arrears. That term was in Ms. O’Connor’s offer. Her proposal for ongoing child support was general and said only that Mr. Merlo should pay table support based on his income. It did not address s. 7 expenses nor her retroactive claim. Mr. Merlo’s offer, on the other hand, proposed child support of $256 per month commencing June 1, 2019 based on annual income of $32,000 and sought to fix arrears at $3,500 whereas I ordered monthly support of $359 on annual income of $40,000 commencing January 1, 2019 plus $117 per month in 2019 for s. 7 expenses. This s.7 amount applied to 2019 only. Thereafter, I ordered the parties to share s. 7 expenses in proportion to income, not to be incurred without consent.

[22] While Mr. Merlo enjoyed more success than Ms. O’Connor on an issue by issue basis, that is not the governing consideration. When success is divided, assessing costs requires a comparative and contextual analysis, not a mathematical tally. Nor is divided success, equal success. Not all issues are of equal significance or require as much court time to determine. [10] As stated in Firth v. Allerton [11], success is determined in relation to the dominate issues in the case. Here, those issues were custody, access and child support and I find that success between the parties was approximately equal.

Unreasonable Behaviour

[23] I now consider each party’s argument that the other behaved unreasonably or, as Mr. Merlo submits, that Ms. O’Connor’s behaviour also breached the high threshold of bad faith. Subrules 24(4), (5), and (8) [12] set out the possible cost consequences if such behaviour is found.

[24] Rule 24(4) [13] states that notwithstanding subrule (1) [14] and the presumption that costs follow success, a successful party who has behaved unreasonably during a case may be deprived of all or part of their costs or ordered to pay all or part of the unsuccessful party’s costs.

[25] The reasonableness of a party’s conduct in the litigation is determined under subrule (5). [15] It states that when deciding whether a party has behaved unreasonably, the court shall examine,

(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.

[26] The cost consequences for bad faith behaviour are set out in rule 24(8) that says the court shall decide costs on a full recovery basis and shall order the party to pay them immediately. Bad faith is not defined in the rules but has been addressed many times in the caselaw. In S. (C.) v S. (M), Perkins J. said the following: [16]

In order to come within the meaning of bad faith in rule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or other persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith.

[27] Each party argues the other was cavalier in their disregard for court orders. Ms. O’Connor also says Mr. Merlo created delay by changing counsel numerous times. For his part, Mr. Merlo argues that Ms. O’Connor was vague on her litigation position and that, in turn, impacted his ability to negotiate a settlement. He further claims that she was unorganized and gave late notice of three new witnesses, advised of new evidence the night before trial, and presented evidence at trial that had not been disclosed.

[28] I found the behaviour of both parties to be wanting in many ways but am not persuaded that it rises to the level of unreasonable or bad faith such that it should impact costs. In this regard, I also consider that both parties made reasonable proposals for settlement that were worthy of counteroffers and ongoing negotiation. It is not clear to me to what extent that may or may not have happened.

The Amount to Be Paid

[29] Rule 24(12) of the Family Law Rules directs the court to consider the following factors when determining the amount of costs to be paid,

(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.

Time Spent by Each Party, Any Legal Fees, Including the Number of Lawyers and Their Rates

[30] In addition to the consideration already given to the parties’ behaviour and their respective offers, I note that the issues in this case, while important to the parties, were not inherently complex. If there was complexity, it was due to the factual detail required to consider the 8-year history of parenting and support issues. With respect to the time spent and fees charged, I have reviewed each party’s Bill of Costs and regard both to be reasonable and proportionate in relation to the issues and circumstances of the case subject to one reduction I would make to Ms. O’Connor’s costs and that is to adjust for the time she included for her attendance at trial. Whether self-represented or not, her presence at trial was required and thus, time away from work was necessary. A self-represented litigant’s entitlement to seek recovery is generally viewed in relation to opportunity costs incurred and work done that would normally be performed by counsel. [17] To the extent that Ms. O’Connor challenges the hourly rate charged by Mr. Merlo’s counsel, she does so in the belief that he was legally aided and says the amount he seeks to recover should reflect the lower rate. Her position is not supported by the law. Section 46 of the Legal Aid Services Act, 1998 [18] provides that costs awarded to a legally aided litigant are recoverable in the same manner and to the same extent as though awarded to someone who did not receive legal aid services.

[31] In these circumstances of divided success and for reasons given, I find it reasonable and proportionate that each party bear their own costs.

Justice D. Summers Date: January 7, 2021