Newmarket Court File No.: FC-18-55276

Date: 2021-09-29

Ontario Superior Court of Justice Family Court

Between:

Maryna Hutsul Applicant

– and –

Dmitri Kostikov Respondent

Counsel: Alexandra Abramian, for the Applicant Dmitri Kostikov, Self-Represented

Heard: June 22, 2021

Reasons for Decision re: Damages and Costs

McKelvey J.:

Introduction

[1] In my decision dated March 17, 2021, I found that the applicant should be entitled to a 35% interest in the family home as well as other properties owned by the respondent. From the above amount, I further found that 65% of the net equity in the home owned by the applicant and her son at 15 Michael Power Place should be deducted to reflect the fact that the applicant cannot expect both to get something given to the respondent and retain something received from the relationship.

[2] There was no difficulty in establishing the net equity owned by the respondent in four rental properties owned by him as all of these properties had been sold prior to my decision. I was unable to determine the value of the family home owned by the respondent at 105 Cherry Hills Road, Vaughan, as well as the applicant’s current residence at 15 Michael Power Place in Toronto as no independent evidence was lead with respect to their values at trial.

[3] In order to determine the values of the family home and the applicant’s home at 15 Michael Power Place, I ordered that the net equity values of these properties be determined by reference to the latest available assessment for municipal tax purposes. From that amount was to be deducted any mortgage or other financial encumbrance on the property.

[4] The parties have returned to make submissions on the appropriate valuations for the family home and the applicant’s property at 15 Michael Power Place as well as for a final determination of the amount owed by the respondent to the applicant as a result of my decision.

What is the net equity value for the family home located at 105 Cherry Hills Road, Vaughan?

[5] The 2020 MPAC assessed value for the family home is $775,000. This assessment is based on the property’s assessed value as of January 1, 2016.

[6] The property was encumbered by both a line of credit and a mortgage. With respect to the line of credit, this was used by the respondent to make the down payments on three of the rental properties. Specifically, $86,600 was paid towards the purchase of 125 Burton Avenue in Barrie; $70,750 was paid towards the purchase of 21 Michelle Drive in Barrie; and $81,850 was paid towards the purchase of 302 Livingstone Street West in Barrie.

[7] Pursuant to the Order of Justice Kaufman dated August 12, 2019, when those properties were sold, the down payments referred to above were to be repaid to the line of credit which effectively reduced the line of credit to zero in relation to those properties. The remaining net sale proceeds from the sale of those properties was to be held in trust by the real estate solicitor pending a trial decision.

[8] Matters are complicated by the fact that the entire net proceeds from the sale of the Livingstone property were released to Mr. Kostikov. Instead of putting the sum of $81,850 into the line of credit, he deposited $172,000 into the line of credit and kept the remaining sum of $54,140 from the sale.

[9] This issue was addressed in an Order made by me on October 15, 2019 where I ordered the respondent to pay the sum of $144,290.04 to the Accountant of the Superior Court in relation to the sale of 302 Livingstone Street West. This represented the net equity in the home after subtracting the down payment which was supposed to have been repaid to the line of credit. Mr. Kostikov complied with this Order but did so by withdrawing that sum from the line of credit.

[10] I have concluded that the fairest way to address this situation is to assume that the respondent complied with the Order of Justice Kaufman. In this event, all sums owing on the line of credit would have been reimbursed to the respondent in full. The net equity in the family home would therefore not be reduced by any amount owing on the line of credit.

[11] Mr. Kostikov argued that he should be entitled for some credit for the interest paid on the line of credit between the date of separation and the time when the properties were sold. However, these properties were all rental properties and I have concluded that the interest cost would have been more than adequately dealt with by the rental income earned. Therefore, no deductions should be made on account of the interest paid for this timeframe.

[12] In the end, therefore, I have concluded that no deduction should be made from the net equity of the family home as a result of the line of credit which was secured by the family home.

[13] In addition to the line of credit, the family home was also subject to a mortgage. At the time of separation the outstanding balance on the mortgage was $356,567.63. On December 31, 2019, the outstanding balance on the mortgage was $343,442.58. Apparently in February, 2020, Mr. Kostikov refinanced the CIBC mortgage increasing the mortgage by $110,000 approximately to a total outstanding balance of $453,903.80. I have concluded that the additional $110,000 which was taken out on the mortgage should not be deducted as part of the net equity in the family home. This is because Mr. Kostikov has dissipated the equity in the home following separation. It is, therefore, not an expense which is properly deductible.

[14] Mr. Kostikov argued that he incurred a number of renovation and repair expenses to the family home which were charged to his personal line of credit. His position is that these expenses should be deducted. There are two difficulties with this argument. The first is that the personal line of credit indicates that cheques were issued for amounts ranging from $18,000 to $2,000. However, copies of the cheques were not produced to document that these related to expenses for the family home. The other difficulty is that all of these expenses were incurred after January 1, 2016. To the extent that these expenses were incurred in relation to the family home, Mr. Kostikov will benefit from the increase in the value of the property as a result of the renovations. The benefit from these renovations is not reflected in the MPAC assessment which was effective January 1, 2016. I therefore decline to reduce the net equity in the family home by these expenditures.

[15] I therefore conclude that the net equity in the family home as at the date of trial should be calculated as follows:

Value of family home: $775,000

Less mortgage on the property (prior to refinancing): $343,442.58

Net equity = $431,557.42

[16] The applicant also initially made a claim for post-separation expenses associated with both the family home and the 15 Michael Power Place property. Included in these expenses were mortgage payments, taxes and maintenance fee payments payable on the property at 15 Michael Power Place. The net balance owing to the applicant by Mr. Kostikov according to the applicant’s calculation was $53,918.76. During the course of argument the applicant abandoned this claim. In my view, she was right to do so. This is because the parties have each elected to continue their residence in those properties. Neither should expect reimbursement for the cost of housing post separation. In my decision I noted that the applicant had a 35% interest in the family home as well as the other properties. I did not make any order entitling the applicant to assert a claim for the continuing expenses of living in her condominium unit.

What is the net equity of the applicant in the property at 15 Michael Power Place?

[17] In my original decision I noted that the applicant should be required to account for the net equity in the home at 15 Michael Power Place. Because there was no independent valuation of this property, I again ordered that its value be calculated according to the most recent MPAC assessment. The MPAC assessment for 2020 for this property was $323,000. This was based on an assessment as of January 1, 2016. The outstanding principal amount of the mortgage on the property was $353,601.99. I am therefore satisfied that the net equity in this property was zero.

Calculation of the amount owed by the respondent to the applicant

[18] Based on the above calculations I have calculated the amount owing by the respondent to the applicant as follows:

Net equity in the family home: $431,557.42

Net equity in the home at 118 the Queensway North, Keswick: $221,963

Net equity in the home at 125 Burton Avenue, Barrie: $91,278.32

Net equity in the home at 21 Michelle Drive, Barrie: $160,049

Net equity in the home at 302 Livingstone Street West, Barrie: $144,290

Total: $1,049,137.74

[19] As the applicant is entitled to a 35% interest in these properties, she is owed the sum of $367,198.21. I order that this amount be paid by the respondent to the applicant, together with pre-judgment interest.

Costs

[20] The applicant made an offer to settle in the action which she acknowledges was more than the amount recovered at trial. She is therefore seeking only her partial indemnity costs of the application.

[21] I accept that the applicant was, however, substantially successful in the action and is therefore entitled to her partial indemnity costs. The applicant’s full indemnity costs total $84,540.72 including HST for counsel feel and $5,804.33 for disbursements. Unfortunately, the applicant’s counsel calculated the partial indemnity costs at $72,760.04 by double counting the HST on counsel fee. She also calculated the partial indemnity fees based on a 70% recovery. I have concluded that it would be more appropriate to allow a 60% recovery for partial indemnity costs. See for example Huang v. Hillary’s Limited, 2017 ONSC 5313, at para. 24. Using a 60% recovery rate, I calculate the applicant’s partial indemnity costs as $50,724.43 for counsel fee and HST plus disbursements of $5,804.33 for a total of $56,528.76.

[22] There is, however, an issue which must be taken into account with respect to the claim for partial indemnity costs. This relates to the applicant’s motion to amend her pleading.

[23] During the course of trial it was apparent that the applicant was relying on a joint family venture to support her claim. However, this claim was not specifically pleaded. Instead, the claim was restricted to a constructive trust claim based on the alleged contributions by the applicant to the acquiring and maintenance of the properties in question.

[24] Initially, this issue was brought to the attention of the applicant’s solicitor on February 11, 2020. At that time the applicant’s solicitor requested an adjournment so that she could reframe her submissions based on the constructive trust analysis. I granted the adjournment on the condition that the applicant’s revised final submissions be delivered by March 11, 2020. This was subsequently revised at the request of the applicant’s solicitor to March 18, 2020 due to a personal emergency.

[25] As a result of the adjournment, the final submissions in this action were delayed and ultimately the case could not be brought back before me until January 25, 2021. The applicant’s solicitor did not deliver revised final submissions by the deadline on March 18, 2020 and only delivered supplementary closing submissions shortly before the re-attendance on January 25, 2021 in which she submitted that a joint family venture was encompassed in her pleading. In the alternative, she stated that in the event the applicant should have plead joint family venture, Rule 11(3) of the Family Law Rules provided that the court shall give permission to a party to amend an application unless the amendment would disadvantage another party in a way for which costs or an adjournment could not compensate.

[26] At the time of the hearing on January 25, 2021, the applicant’s solicitor sought leave to bring a motion to amend the application. This necessarily involved some delay. The original dates of January 25 and 26, 2021 had been reserved for final submissions. As a result, the motion to amend the application was heard on January 25. Final submissions could not be completed on January 26 and a further adjournment was required to February 25, 2021 to complete submissions. As noted in my decision of January 25, 2021 permitting the applicant to amend her application, I intend to take these issues into account when addressing the issue of costs in this application.

[27] The effect of the applicant’s failure to properly plead her cause of action resulted in two adjournments of the case. It also resulted in the loss of two hearing days, the first on February 11, 2020 and the second on January 25, 2021 when her motion to amend the pleading was heard.

[28] The applicant suggests that a reduction of $2,772 plus HST of $360.36 is appropriate. In my view, this proposed reduction is inadequate to reflect the fact that Mr. Kostikov was required to endure two adjournments, having prepared on each occasion for final submissions as well as the fact that two hearing days were lost.

[29] By my calculation there were a total of ten days spent at the hearing of this matter including June 22. The loss of two days represents approximately 20% of the trial time. Of course, it must be kept in mind that the bill of costs include not only trial time but all steps in the litigation (excluding steps which are not recoverable such as case conferences, settlement conferences and those motions where costs were not reserved to the trial judge). On the other hand, I need also to take into account Mr. Kostikov’s situation in having to attend on at least two occasions expecting to make final submissions and then finding that the matter could not proceed or that he was required to deal with an issue that was unanticipated. On balance, I have concluded that it would be reasonable to reduce the applicant’s costs by 20% in recognition of these factors. As a result, I award the applicant her partial indemnity costs of $50,724.93 less $10,144.89 or $40,579.54 for counsel fee and HST plus disbursements for $5,804.33 for a total of $46,383.87.

Conclusion

[30] For the reasons given above, I award the sum of $367,198.21 plus interest and partial indemnity costs of $46,383.87.

[31] I have been advised that the current amount held in trust by the real estate lawyer is $251,328.26. I order that these funds be paid to the applicant. I further order that the applicant shall be entitled to the funds paid into court which will also serve to reduce the judgment against the respondent. To the extent that there remains any funds paid into court after satisfaction of this award, the remaining funds shall be paid out to the respondent.

Justice M. McKelvey

Released: September 29, 2021