COURT FILE NO.: FS-14-81731
DATE: 2021 11 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
LISA SAROLI
Self-represented
- and -
LUCIANO SAROLI
J. Rosenberg, for the Respondent
COSTS ENDORSEMENT
Petersen J.
[1] This costs endorsement relates to a family law trial conducted in January 2021. I issued Reasons for Judgment on June 21, 2021: Saroli v. Saroli, 2021 ONSC 4450. I have received and reviewed written costs submissions from the parties.
PARTIES’ POSITIONS
[2] The Respondent, Luciano Saroli, is seeking an order for costs of the case on a partial indemnity basis in the all-inclusive amount of $250,000, payable forthwith by the Applicant from her share of the net proceeds of sale of the parties’ matrimonial home. Mr. Saroli was represented by two law firms over the course of this 6.5-year proceeding. He incurred approximately $500,000 in legal costs (inclusive of fees, disbursements, and HST).
[3] The Applicant, Lisa Saroli, submits that no costs should be awarded in this case. She was self-represented at trial but was previously represented by two separate law firms at different stages of the proceeding. She also retained various lawyers on limited scope retainers to assist her with different issues over the years, including to make some written submissions at trial. She incurred legal costs in the amount of $196,733 (inclusive of fees, disbursements and HST).
FRAMEWORK FOR ANALYSIS
Jurisdiction
[4] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that, subject to statutory provisions and the rules of court, the costs of a proceeding are in the discretion of the court. The relevant rules in this case are the Family Law Rules, O.Reg. 114/99.
Purposes of Costs Awards
[5] In family law proceedings, rr. 2(2), 18 and 24 establish a framework for analyzing costs claims. These 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: Mattina v. Mattina, 2018 ONCA 867, at para. 10.
Principles for Determining Liability for Costs
[6] The first issue in addressing costs is to determine whether either party is liable to pay the other’s costs.
Success in the Litigation
[7] Subrule 24(1) creates a presumption of costs in favour of the successful party. There are two schools of thought regarding the appropriate approach to determination of a litigant’s success. Some judges have held that settlement offers are the yardstick by which success at trial should be measured: Lawson v. Lawson, 2008 23496 (ON SC), at para. 7. Others have held that success should be measured by comparing the outcome at trial with the relief sought by the parties in the litigation, rather than with the terms of any offers: Lazare v Heitner, 2018 ONSC 4861, at para. 16; Guo v. Li, Li and Zhang, 2020 ONSC 2435, at para. 17. I agree with the latter approach.
[8] Success should be measured by comparing the positions of the parties on the issues litigated with the orders made. For the reasons articulated by my colleague Kurz, J. in DeSantis v. Hood, 2021 ONSC 5496, at paras. 40 to 53, I find that offers to settle are not a factor in the determination of success in a proceeding. As will be explained below, settlement offers are nevertheless an important consideration in assessing both liability for costs and quantum of costs.
[9] Where success in a case is divided, the court may apportion costs as appropriate: r. 24(6). Where success is divided equally or roughly equally, it is not uncommon for the court to make no order for costs: Coscarella v. Coscarella, 2000 20376 (ON SC), at paras. 18-19; Guo v. Li, Li and Zhang, at para. 56.
[10] In most family law proceedings, there are multiple issues in dispute. It is relatively rare that one party will prevail on every issue at trial. It is therefore not uncommon for both parties to claim to have been successful overall in the litigation, or for one party to argue (as Ms. Saroli does in this case) that success was divided and that costs therefore should not be awarded.
[11] The determination of whether success was truly “divided”, or of which party succeeded overall, does not simply involve adding up the number of issues and running a mathematical tally of which party won more of them: Brennan v. Brennan, 2002 CarswellOnt 4152 (S.C.J.), at para. 3. Rather, it requires a contextual analysis that takes into consideration the importance of the issues that were litigated and the amount of time and expense that were devoted to the issues: Jackson v Mayerle, 2016 ONSC 1556, at para. 66; Thompson v. Drummond, 2018 ONSC 4762, at para. 12; DeSantis v. Hood, at para. 39.
Reasonableness of the Parties’ Conduct
[12] Although there is a presumption of costs in favour of the successful litigant, the Rules do not mandate that the successful party always be awarded costs. A successful party who has behaved unreasonably during a case may be deprived of all or part of their own costs or may be ordered to pay all or part of the unsuccessful party’s costs: r. 24(4).
[13] Settlement offers are one factor for consideration when assessing the reasonableness of parties’ behaviour. Subrule 24(5) provides the following guidance:
In deciding whether a party has behaved reasonably or 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.
Effect of Settlement Offers
[14] Offers to settle (or the absence of an offer to settle) can impact both the issue of liability for costs and the amount of costs awarded when liability is found.
[15] Subrule 18(14) sets out the cost consequences of a failure to accept an offer to settle that complies with the requirements of r. 18:
A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:
If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
The burden of proving that a court order is as favourable as or more favourable than an offer to settle is on the party who claims the benefit of this rule: r. 18(15).
[16] To determine whether an order is as or more favourable than a settlement offer, the court is not required to examine each term of the offer as compared to the terms of the order and weigh with microscopic precision the equivalence of the terms. Rather, what is required is a general assessment of the overall comparability of the offer as contrasted with the orders that were ultimately made: Wilson v. Kovalev, 2016 ONSC 163, at para. 25. Where the offer to settle is not severable, however, the costs consequences set out in r. 18(14) should not be applied unless judgment is more favourable on all issues: Coscarella, at para. 7.
[17] When the court determines liability for costs, it may take into account any written offer to settle, the date it was made and its terms, even if r. 18(14) does not apply: r. 18(16).
Principles for Determining Quantum of Costs
[18] If liability for costs is found, the court must determine the appropriate quantum of costs. Proportionality and reasonableness are the touchstone considerations to be applied in fixing the amount of costs: Beaver v. Hill, 2018 ONCA 840, at para. 12.
[19] The Family Law Rules expressly provide that, depending on the reasonableness of the parties’ conduct and on the presence or absence of Offers to Settle, a judge may increase or decrease what would otherwise be the appropriate quantum of costs awarded. Subrule 24(12) sets out the following list of factors the court must consider in setting the amount of costs:
(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.
[20] “Any other relevant matter” includes consideration of the financial means of the parties, their ability to pay costs (or to absorb their own costs), and the impact of any costs award on children in their care: C.A.M. v. D.M., 2003 18880 (ON CA), at para. 42; Davis v. Davis, 2004 19156 (ON SC), at para. 6; and Clark v. Clark, 2014 ONCA 175, at para. 91. A party’s limited financial means will generally be relevant to the appropriate quantum of costs and how payment should be effected, but not to the issue of liability for costs: Izyuk v. Bilousov, 2011 ONSC 7476, at paras. 50-51.
[21] The Court of Appeal for Ontario has ruled that, “[w]hile it may be appropriate, in the exercise of a judge's overriding discretion, to reduce the quantum of costs that a party will have to pay because of their financial condition, this principle does not apply in the reverse”: Beaver v. Hill, at para. 18. “There is no principle relating to costs that requires wealthier individuals to pay more for costs for the same step in a proceeding than less wealthy ones”: Beaver v. Hill, at para. 18.
[22] Access to justice is also a relevant consideration. The Court should consider the importance of not unduly deterring potential litigants from pursuing legitimate claims for fear of overly burdensome costs consequences: Jahn-Cartwright v. Cartwright, 2010 ONSC 2263, at para. 4; Izyuk v. Bilousov, at para. 40; Weber v. Weber, 2020 ONSC 6855, at para. 11; and DeSantis v. Hood, at para. 10.
[23] Under the Family Law Rules, judges are not constrained by the normal scales of costs found in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194: Beaver v. Hill, at para. 9. However, the presumption of costs in favour of a successful litigant does not support a presumptive “full recovery” approach, nor even “close to full recovery” approach to costs in family law matters: Beaver v. Hill, at paras. 10-11.
[24] The Family Law Rules expressly contemplate full recovery costs in only three specific scenarios. I have already reviewed two of those scenarios above, namely where a party has behaved unreasonably (r. 24(4)) or has beaten an offer to settle under r. 18(14): Mattina, at para. 15. The third scenario is set out in r. 24(8), which stipulates that, “If a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately.”
[25] Proof of bad faith requires meeting a high threshold. In order to come within the meaning of “bad faith” in r. 24(8), a party’s impugned 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”: S.(C.) v. S.(M.), 2007 20279 (ON SC), at para. 17, aff’d 2010 ONCA 196; Scalia v. Scalia, 2015 ONCA 492, at para. 68.
ANALYSIS
Determination of Liability for Costs in this Case
[26] Consideration of success is the starting point in determining liability for costs: Mattina, at para. 13. Mr. Saroli takes the position that he was the overall successful party in this case, whereas Ms. Saroli argues that success was evenly divided between them.
“Success” in Pre-Trial Motions
[27] The parties had multiple court appearances on motions prior to trial. The outcomes of those motions are summarized in paragraph 6 of my Reasons for Judgment.
[28] In support of her position that the parties enjoyed equally divided success in this proceeding, Ms. Saroli argues that she was successful in pre-trial motions for temporary exclusive possession of the matrimonial home and for relief on child-related issues, which she claims were “the main driver of the litigation”. She further submits (without evidence) that the parties’ resolution of the parenting issues was in line with her position throughout the course of the litigation.
[29] Ms. Saroli’s motion for temporary exclusive possession of the matrimonial home was granted on December 19, 2014. The child-related issues (e.g. parenting time, prospective child support, apportionment of prospective s. 7 expenses, and insured health and dental benefits coverage for the children) were the subject of multiple temporary orders dated December 19, 2014, June 28, 2016, September 15, 2017 (on consent), and August 16, 2019 (on consent). These child-related issues were finally resolved by a consent order dated March 13, 2020 and by agreement on the first day of trial to a further final consent order dealing with the apportionment of prospective s. 7 expenses.
[30] I have concluded that it would not be appropriate in the circumstances for me to consider the outcomes of these pre-trial motions as indicative of Ms. Saroli’s success in this case. I have arrived at this conclusion for the following reasons.
[31] First, the pre-trial motions that were resolved on consent cannot reasonably be characterized as evidence of “success” by either party. As Leach, J. noted in Witherspoon v. Witherspoon, 2015 ONSC 6378, at para. 42:
[W]hether one is focused on pre-trial steps in the litigation or the other residual costs of the litigation, the attempt to argue cost entitlement and quantification through application of the normally applicable cost recovery rules, after the parties have reached a formal settlement of the substantive issues between them, without trial, is fundamentally misconceived and inappropriate.
[32] Assessing the degree of parties’ relative “success” presupposes the existence of objective benchmarks from which the court can draw reliable conclusions (e.g., by comparing the parties’ positions with objectively determined outcomes that reveal the relative merits of each party’s position). Such objective benchmarks are lacking where the outcome against which parties attempt to argue their degree of “success” is not the product of judicial fact-finding, but an agreed settlement or consent order: Witherspoon, at para. 42. See also Hassan v. Hassan, 2019 ONSC 1199.
[33] Second, although Ms. Saroli can legitimately claim to have “succeeded” in two contested motions argued on December 19, 2014 and June 28, 2016, she was awarded $2,500 in costs for each motion on those dates. Her success in those motions has therefore already been factored into previous costs awards and should not be credited twice.
[34] Third, Ms. Saroli’s submissions conveniently overlook the pre-trial motions on spousal support issues. She was successful in obtaining a temporary order for $978 monthly in spousal support on June 28, 2016 (with costs awarded to her in the amount of $2,500). She subsequently consented to a variation of the amount, reducing the spousal support payments to $1 monthly, on September 15, 2017. Then, on August 16, 2019, she lost a motion seeking reinstatement of $901 monthly in spousal support retroactive to October 1, 2017. She also lost a claim for compensation (essentially childcare fees) from Mr. Saroli for parenting time that she alleged he did not exercise.
[35] Thus, even if I were to consider the outcomes of contested pre-trial motions in which costs were awarded in the context of my assessment of the parties’ relative success in the case, I would not conclude that Ms. Saroli was more successful in the earlier steps of this proceeding. Rather, the parties’ success was divided in the contested motions. Both parties have already been awarded costs in respect of the motions in which each of them prevailed, so the outcomes of those prior motions will not factor into my determination of success in the case.
[36] Finally, I should note that I do not accept Ms. Saroli’s submission that the child-related issues were driving the litigation. The two biggest child-related issues (i.e., parenting and prospective child support) were fully resolved ten months prior to the commencement of the trial, yet the parties were unable to settle the remaining property and financial issues, which they litigated with mutual fervour over 11 days of trial.
Success at Trial
[37] Ms. Saroli argues that there was overall divided success at trial. She submits that an award of costs would be inappropriate because there is “no clear winner or loser in this matter”.
[38] I agree that there was divided success on equalization issues, on issues relating to post-separation adjustments, and on the issue of occupation rent, all of which involved claims for significant sums of money. I do not, however, agree that there was “no clear winner” in the case. For reasons explained below, I find that Mr. Saroli was considerably more successful than Ms. Saroli overall.
[39] With respect to equalization, Ms. Saroli succeeded in a dispute about the interpretation of the “deemed joint property” provision in the parties’ Marriage Contract, in preventing Mr. Saroli from excluding the value of his half interest in a joint bank account (with Mr. Romano) from the calculation of his net family property, and in a dispute about the value of Mr. Saroli’s vehicle on the date of separation. These were, however, small ticket items that made only minimal difference to the ultimate equalization calculation, and that consumed little court time. Ms. Saroli succeeded on one major equalization issue, namely in defeating Mr. Saroli’s claim for an exclusion of $50,000 from his net family property, which he asserted was a gift to him during the marriage that was traceable to a property that he owned on the date of separation. That issue consumed a significant amount of court time and required considerable trial preparation by the parties.
[40] For his part, Mr. Saroli succeeded in excluding the balance of a Scotiabank account from the calculation of his net family property and in a dispute about the value of Ms. Saroli’s vehicle. These were small ticket items that did not consume much court time or resources. He succeeded on two major equalization issues, namely the exclusion of the values of his interests (i.e., $55,500 and $44,000) in two investment properties from the calculation of his net family property, and the defeat of Ms. Saroli’s claim for a deduction of a $14,400 debt she said she owed her brother on the date of separation. The exclusion of the investment properties was a particularly contentious issue that consumed a considerable amount of time and resources at trial and in preparation for trial.
[41] At the commencement of the trial, Ms. Saroli took the position that she was entitled to an equalization payment in the amount of $15,703. Mr. Saroli argued that he was entitled to an equalization payment of $38,988. I ultimately ordered him to pay her $14,341, but I also ordered her to transfer $19,423 from her pension to his pension. Clearly, success was divided overall on the equalization issues.
[42] A substantial amount of time was devoted at trial to dealing with the parties’ respective claims for a multitude of post-separation adjustments. Many of the items in dispute were for relatively small amounts of money, but the cumulative post-separation credits claimed by both parties amounted to significant sums. The issue was clearly important to the parties. Ms. Saroli claimed that she was owed a total of approximately $130,000. Mr. Saroli claimed to be owed a total of approximately $93,000. They each succeeded in some of their claims. I ultimately ordered her to pay him a set off amount of $16,393 for post-separation credits. There was, therefore, divided success on these issues, but Mr. Saroli was relatively more successful.
[43] Mr. Saroli similarly achieved partial success with respect to the issue of occupation rent. He made a claim for $87,032. Ms. Saroli resisted paying any occupation rent. I discounted his claim to account for both the children’s occupation of the matrimonial home and tax consequences. I ultimately ordered her to pay him $32,016.
[44] Significant costs were incurred by Mr. Saroli in pursuing the occupation rent claim. He was required to retain an expert to provide a report and opinion evidence on the rental market value of the matrimonial home over the years since the parties separated. He was billed $1,500 (plus tax) by the expert for preparation of the report and an additional $1,500 (plus tax) for her court appearance. Ms. Saroli insisted that he call the expert witness to give viva voce evidence at trial, which was not a productive use of court resources because little was accomplished by Ms. Saroli’s cross-examination of the expert.
[45] On all other major issues, Mr. Saroli achieved substantial success at trial. With respect to retroactive and retrospective child support, Ms. Saroli claimed $73,240. Mr. Saroli made an unsuccessful objection to the retroactive component of her claim, but very little time was devoted to that issue and the monetary sum was nominal. He did not dispute that retrospective child support was owing, but he contested the amount claimed by Ms. Saroli. A large amount of time and resources was devoted to this issue at trial and in trial preparation.
[46] I ultimately ordered Mr. Saroli to pay $22,491 in retro child support, which represented almost complete success for him. He prevailed on the issue of the commencement date for child support and on the issue of imputation of income to him for support purposes. There was split success on the issue of whether capital gains should be included in his income, but he was overwhelmingly more successful on that issue because the larger capital gains were excluded.
[47] Mr. Saroli achieved comprehensive success on the major issue of retrospective spousal support. Ms. Saroli claimed to be owed $103,224. I imputed income to her based on the deduction of unreasonable expenses and on intentional underemployment. I rejected her compensatory claim for spousal support, as well as her non-compensation needs-based claim. I ultimately held that she was not entitled to any retrospective spousal support. A considerable amount of court time and trial preparation time was devoted to this issue.
[48] Mr. Saroli also achieved substantial success on the issue of retrospective child-related expenses. Ms. Saroli sought an order for him to pay her half of about $18,000 for s. 7 expenses that she claimed to have incurred since separation. I rejected her claim and ultimately ordered her to reimburse him $13,070 for overpayment of child-related expenses, most of which I found did not qualify as s. 7 expenses under the FCSG. A significant amount of court time and trial preparation time was devoted to this issue, even though the monetary amount involved was not as large as some of the other issues in dispute.
[49] Based on the above, I find that Mr. Saroli was, overall, significantly more successful than Ms. Saroli at trial. He is therefore presumptively entitled to costs, albeit adjusted to account for the parties’ divided success on three major issues.
[50] Mr. Saroli’s presumptive entitlement to costs can, however, be displaced either by the consequences of failing to accept a settlement offer under r. 18(14) or by unreasonable or bad faith conduct that warrants a deprivation of his costs under r. 24(4) or 24(8).
No Rule 18 Cost Consequences
[51] Ms. Saroli does not claim to have made an Offer to Settle that would trigger the consequences of r. 18 and deprive Mr. Saroli, as the successful party, of his costs.
No Basis for Deprivation of Costs
[52] The presumption of costs in favour of Mr. Saroli is not displaced by unreasonable or bad faith conduct on his part.
[53] Ms. Saroli did not allege bad faith. She did, however, argue that, in my Reasons for Judgment, I found that Mr. Saroli’s position on retroactive child support was without merit and that his interpretation of a disputed clause in the marriage contract was absurd and self-serving. Neither of these issues consumed much time or resources in the trial, and significant sums of money were not at stake. Mr. Saroli’s untenable positions on these two relatively minor disputes do not amount to unreasonable behaviour within the meaning of r. 24(4), such that he should be deprived of all or part of his costs. His positions on major issues, even those on which he did not ultimately prevail, were reasonable.
[54] Mr. Saroli did, however, engage in some unreasonable litigation behaviour. In my Reasons for Judgment, I found that he failed to disclose two assets in his sworn Financial Statements. One was a joint bank account that he owned with a third party (Antonio Gatti) on the date of marriage, and the other was an investment portfolio containing GICs and a savings account, which existed on the date of separation.
[55] Any failure by a party to comply with disclosure obligations constitutes unreasonable conduct that can have cost consequences. Full financial disclosure is imperative in all family law cases, not only for the court to be able to render justice, but also to facilitate settlement by the parties. Mr. Saroli’s concealment of the existence of his investment portfolio likely contributed to the parties’ inability to resolve their dispute about the exclusion of the value of his investment properties from the calculation of his net family property. Without disclosure of the portfolio, Ms. Saroli had no means to assess whether excluded funds from the proceeds of sale of an excluded property (pursuant to the marriage contract) could be traced to the disputed investment properties.
[56] Incomplete financial disclosure must never be condoned by the Court, but there are degrees of egregiousness of failures to disclose, which impact the severity of costs sanctions that should follow. Mr. Saroli’s investment portfolio contained only $62 on the date of separation, so his non-disclosure of the portfolio had no material impact on the calculation of his net family property. Similarly, his joint account with Mr. Gatti was an asset excluded by the marriage contract, so his non-disclosure of that account had no impact whatsoever on the equalization calculation. In these circumstances, his failure to make full disclosure of these assets, while unacceptable, is not so grievous as to attract severe cost sanctions. It certainly does not justify depriving him of his costs.
Determination of the Amount of Costs
[57] Mr. Saroli seeks a court order for a very substantial amount of costs (i.e., $250,000). His request is based, in part, on multiple offers to settle that he made, which were not accepted by Ms. Saroli, and in part on Ms. Saroli’s litigation conduct, which he argues amounts to bad faith.
Settlement Offers
[58] Mr. Saroli made three alternative Offers to Settle on January 5, January 9 and January 10, 2021. The trial commenced on January 11, 2021. All three Offers remained open until one minute after the commencement of trial. Ms. Saroli had the option of accepting any one or more of the three offers. The first Offer (January 5, 2021) was comprehensive but severable into three parts. The second and third Offers were not global – they related to specific issues – and were not capable of being accepted in part. The terms of all three Offers were reasonable and reflect Mr. Saroli’s willingness to compromise.
[59] The second Offer (January 9, 2021) addressed only the issues of spousal support and occupation rent. In that Offer, Mr. Saroli effectively offered to waive his claim for occupation rent if Ms. Saroli waived her claims for retrospective and prospective spousal support. He achieved an outcome at trial on both these issues that was as favourable or more favourable than the terms of the Offer. The cost consequences set out in r. 18(14) do not apply in the circumstances because the January 9, 2021 Offer was not made at least seven days before the commencement of the trial. But the reasonableness of the Offer, the unreasonableness of Ms. Saroli’s failure to accept it, and the more favourable outcome to Mr. Saroli at trial, are relevant considerations under rr.18(16), 24(5) and 24(12)(a)(iii). I agree with Mr. Saroli’s submission that Ms. Saroli’s failure to accept the January 9, 2021 Offer should attract a higher award of costs in his favour because significant trial preparation time and court time would have been saved had Ms. Saroli accepted the Offer.
[60] Ms. Saroli made a global non-severable Offer to Settle on January 10, 2021. Mr. Saroli submits that her Offer underscores her unreasonable litigation behaviour and serves as an example of why he had no choice other than to defend the application in the face of her untenable positions. He argues that, “This was all sport to Lisa.” I disagree. Although she did not achieve an outcome at trial that was as favourable as the terms of her January 10, 2021 Offer, the Offer nevertheless reflected a willingness to compromise on some important issues.
[61] Ms. Saroli emphasizes, in her submissions, that both parties made multiple settlement offers throughout the proceeding, and that she made several offers to purchase Mr. Saroli’s interest in the matrimonial home. She argues that she consistently tried to resolve their issues outside of court. However, she produced no evidence to support these submissions. I have no information about the proposed terms of settlement in any prior Offers and therefore cannot take them into consideration in fixing costs.
[62] Ms. Saroli highlights, in her submissions, that her January 10, 2021 Offer included terms of settlement with respect to spousal support and occupation rent that essentially mirrored Mr. Saroli’s January 9, 2021 Offer. She argues that this demonstrates her reasonableness, but on the contrary, it underscores the point that she ought to have accepted his January 9, 2021 Offer, which would have meaningfully narrowed the issues in dispute and significantly reduced the length and cost of the trial. There will therefore be cost consequences to Ms. Saroli for unnecessarily prolonging the trial.
Pre-Trial Resolution of Issues
[63] Ms. Saroli notes that she abandoned her claim for prospective spousal support and agreed to the sale of the matrimonial home (something that Mr. Saroli had been seeking for years) at the commencement of the trial. She submits that her prior resistance to selling the home to a third party was driven by her focus on the children’s best interests. She argues that the shift in her position on these issues at trial is indicative of her reasonableness and willingness to compromise.
[64] Mr. Saroli, in contrast, argues that the shift in her position is evidence of her litigation tactics namely “untenable positioning, designed to force the less resourced party into financial and emotional devastation, followed by capitulation (and, accordingly, into unprincipled resolutions).” In the specific circumstances of this case, I agree with Mr. Saroli’s submission on this point. Ms. Saroli’s last-minute withdrawal of an untenable spousal support claim and her last-minute agreement to an inevitable sale of the matrimonial home do not reflect compromise on her part. When considered in conjunction with her other unreasonable conduct (discussed below), Ms. Saroli’s long-standing refusal to sell the matrimonial home prior to trial was clearly a litigation tactic that exacted a toll of financial hardship on Mr. Saroli.
Ms. Saroli’s Unreasonable Litigation Conduct
[65] In my Reasons for Judgment, I made the following findings:
a) Ms. Saroli misled Mr. Saroli to believe that her niece (their trustee) had retained the proceeds of sale from their jointly-owned Jake property and had converted them to her use.
b) Ms. Saroli concealed the fact that she had received the net proceeds of the Jake property sale by putting the money (about $89,000 in cash) in a safety deposit box, and she failed to disclose the funds on any of her sworn financial statements.
c) She instructed her former lawyer to take a disingenuous position about her purported inability to disclose information pertaining to the Jake property sale when Mr. Saroli specifically requested disclosure of same, then feigned forgetfulness about having done so at trial.
d) She gave deliberately misleading and patently false evidence under oath during questioning to further mislead Mr. Saroli about the Jake property proceeds.
e) After finally giving an undertaking during questioning to provide Mr. Saroli with documentation relating to the Jake property sale, she delayed unjustifiability and ultimately made incomplete disclosure, misrepresenting the amount of the proceeds that she had received. She did not disclose the full amount until she was cross-examined at trial.
f) She spent all the proceeds from the Jake property sale (including Mr. Saroli’s half share) without Mr. Saroli’s knowledge or consent, at a time when the parties had considerable debts that could have largely been retired with that money.
g) After obtaining a temporary order for spousal support in June 2016, she failed to disclose a material change in her employment status in November 2016. She withheld information about her income for eight months, despite repeated requests from Mr. Saroli’s counsel, ultimately forcing Mr. Saroli to bring an unnecessary motion for disclosure. During this time, she received spousal support payments to which she was not entitled.
h) She submitted claims to the Family Responsibility Office for reimbursement of a multitude of child-related expenses that do not qualify as s. 7 expenses under the FCSG, which resulted in deductions from Mr. Saroli’s wages and remittance of funds to her to which she was not entitled.
[66] I also found that Ms. Saroli’s reluctance to sell the matrimonial home, combined with the above-mentioned unreasonable conduct, left Mr. Saroli without the financial means to obtain alternative accommodation, drove him into debt, damaged his credit rating, and forced him to resort to encroachment upon his capital assets to get by.
[67] Mr. Saroli argues that Ms. Saroli’s conduct amounts to bad faith. He relies on r. 24(8) to argue that she should be ordered to pay his costs forthwith from her share of the net proceeds of sale of the matrimonial home, but he is not seeking an award of costs on a full recovery basis, which is an automatic consequence of a finding of bad faith under r. 24(8). Since he is not seeking full recovery of his costs, it is unnecessary for me to determine whether Ms. Saroli’s conduct constitutes bad faith. There is no question that her behaviour was unreasonable and egregious. It will be sanctioned with a costs award that is markedly higher than I otherwise would have ordered. Because of her misconduct, I will deny her any apportionment of costs for divided success on three major issues at trial.
Reasonableness and Proportionality of Costs
[68] Ms. Saroli’s bad behaviour in this case should be sanctioned, but that does not entitle Mr. Saroli to an inflated costs award that is disproportionate to the importance of the issues that were litigated. All costs awards must be governed by the principles of reasonableness and proportionality.
[69] Mr. Saroli incurred $500,000 in legal expenses, an amount that is grossly disproportionate to the issues in dispute. His request for $250,000 in costs on a partial recovery basis may superficially seem reasonable because it represents only half of what he incurred, but that amount is still excessive relative to the amounts at stake.
[70] I note that Ms. Saroli also incurred disproportionate expenses in the amount of $196,733, despite representing herself at trial. I echo the sentiments expressed by my colleague, Shaw, J., in Guo v. Li, Li and Zhang (at paras. 54-55), a family law case involving an eight-day trial:
[54] I must also comment on the legal fees incurred by the parties. The combined legal fees were approximately $490,000. It is very concerning to see that level of fees being incurred, particularly given the income earned by the parties. …
[55] [A]t some point during this litigation, the parties should have recognized that the legal fees they were incurring were disproportionate to the issues in dispute. The amount of money spent on legal fees was money that the parties could have used for their personal benefit and for their children’s benefit.
[71] Ms. Saroli bears most of the blame for driving up the litigation costs, but Mr. Saroli is not entirely without responsibility for the excessive legal expenses that he incurred. Litigation should be approached in a cost-effective rather than a scorched-earth manner. In this case, both parties engaged aggressively in the litigation and incurred far greater costs than were warranted given the issues in dispute and the amounts at stake. Both were ordered to pay costs as a result of pre-trial motions, but that did not dampen the fervour with which they pursued their claims to trial.
[72] I note that, in his Endorsement dated October 31, 2019, Trimble, J. expressed concern about the amount of costs sought by Mr. Saroli in connection with his successful defence of Ms. Saroli’s motion for retroactive reinstatement of spousal support. Mr. Saroli was seeking $14,264 in costs. He was completely successful in the motion and he served Offers to Settle that were found to entitle him to costs on an elevated scale from the date the Offers were made. Still, the motions judge awarded him costs in the amount of only $7,500, plus disbursements totalling $947.65. Trimble, J. noted, “it appears that both parties conducted this litigation ferociously, without apparent regard to cost or proportionality”. Both parties should have heeded the implicit caution that excessive costs would not be recoverable in the proceeding and that proportionality and reasonableness would govern any determination of costs.
[73] By the time the trial commenced, the parties were about $55,000 apart in their respective positions on the issue of equalization, about $25,000 apart on retrospective child support, and about $12,000 apart on retrospective s.7 issues. These are not trivial sums of money, but they certainly do not warrant the combined $700,000 in litigation expenses incurred by the parties. I recognize that the parties were $87,000 apart on occupation rent and $103,000 apart on retrospective spousal support, but (as discussed above) those two issues should have been resolved based on Mr. Saroli’s January 9, 2021 Offer to Settle. Ms. Saroli bears responsibility for those issues proceeding unnecessarily to trial.
[74] The only truly contentious issue of high monetary significance was post-separation credits, which should have been whittled down prior to trial. The parties’ respective cumulative claims were high, but in the end, I ordered a set-off payment to Mr. Saroli in the modest amount of only $16,393, hardly worth the exorbitant legal expenses incurred in pursuit of these claims.
[75] Mr. Saroli’s costs claim is for legal fees and disbursements incurred from the inception of the proceeding through to the end of trial, excluding the motion for interim spousal support that he successfully defended on August 16, 2019, for which he was already awarded costs. Ms. Saroli argues, based on Bordin v. Bordin, 2015 ONSC 4943, at paras. 4 and 12, that a party cannot recover costs for a prior event unless such costs were explicitly reserved to the trial judge. This is incorrect. The case law cited by Ms. Saroli predates the enactment of s. 14 of O.Reg. 298/18, an amendment to the Family Law Rules that introduced r. 24(11), which specifies that the failure of a conference judge or a motions judge to determine costs or to expressly reserve costs to a later stage of the proceeding “does not prevent the court from awarding costs in relation to the step at a later stage in the case.”
[76] There was one occasion in this case, on September 15, 2017, when a motions judge issued a consent Order in which costs were expressly reserved to the trial judge. There was also a motion heard on January 10, 2020, a consent Order issued on March 13, 2020, and a few Case Conferences and Settlement Conferences after which the presiding judge’s Endorsement was silent as to costs. The costs I award to Mr. Saroli for the proceeding will encompass the expenses associated with those court appearances.
[77] The costs awarded will not, however, include legal fees and disbursements associated with prior court appearances at which costs were decided. The Trial Record shows that appearances on November 27, 2014, December 11, 2014 and December 19, 2014 all related to a motion for which costs in the amount of $2,500 were ordered in Ms. Saroli’s favour. Similarly, appearances on May 31, 2016 and June 28, 2016 related to a motion for which $2,500 in costs were awarded to Ms. Saroli. At a Trial Management Conference conducted on August 13, 2019, the presiding judge ordered “no costs”, and after a hearing on August 16, 2019, the motions judge issued a consent order that specified “no costs”. There are no grounds on which to interfere with any of these prior costs Orders.
Mr. Saroli’s Former Lawyer’s Fees and Disbursements
[78] Mr. Saroli submitted only a summary overview of legal expenses incurred while represented by his former law firm, Christen Seaton Burrison Hudani LLP. The overview shows that Mr. Saroli paid a total of $124,570.81 for work performed between February 2015 and August 2018. There is no breakdown of the time spent on each task, nor even a breakdown of amounts attributable to fees as opposed to disbursements, except for mention that $6,000 was paid to Epstein Cole for mediation in November 2017. Mr. Saroli is seeking costs in the amount of $80,971, all inclusive, for the expenses incurred while he was represented by his former counsel.
[79] Without a breakdown, it is impossible for the court to assess the reasonableness and proportionality of the lawyer’s hourly rates and time spent on various tasks, as required by r. 24(12)(a)(ii) and (iv).
[80] The Trial Record shows that a couple of Case Conferences and a Settlement Conference occurred during that period of time, at which Mr. Saroli was represented and for which he is entitled to recovery of costs. The evidence at trial established that there was voluminous correspondence between the parties, including extensive requests for disclosure by Mr. Saroli regarding both the Jake property sale proceeds and Ms. Saroli’s employment income. Mr. Saroli is entitled to recovery of costs for those communications between counsel, which were necessitated by Ms. Saroli’s unreasonable conduct.
[81] Mr. Saroli’s former counsel also assisted with drafting pleadings, preparation of Financial Statements, and document disclosure, which are recoverable expenses.
[82] While I would not ordinarily award costs in respect of the expense of private mediation because it does not arise directly from the court proceeding, in this case, the parties consented to an Order dated September 15, 2017 that contains the following provision: “The Respondent will pay the Applicant’s share of the mediator’s fees, but will be reimbursed and repaid in the final resolution of the issues, subject to any order for costs.” Based on that consent Order, I will require Ms. Saroli to reimburse Mr. Saroli $3,000 for half the mediator’s fees. I will order only $1,000 additional costs for disbursements incurred by Mr. Saroli’s former counsel, to cover necessary expenses such as filing fees and service costs. These amounts are inclusive of HST. Without an itemization of other disbursements incurred, it would not be reasonable for me to order a higher amount.
[83] With respect to the fees billed by Mr. Saroli’s previous counsel, taking all the above factors into consideration, I conclude that a reasonable and proportionate amount of fees to carry the file until August 2018 (excluding steps in the proceeding for which costs have already been awarded) is $33,000, inclusive of HST. Due to Ms. Saroli’s unreasonable litigation conduct, this is a higher amount that otherwise would have been awarded.
Mr. Saroli’s Trial Lawyer’s Fees and Disbursements
[84] Mr. Saroli submitted both a Costs Outline and a detailed Bill of Costs from his current law firm, Teplitsky Colson LLP, with particularized dockets for all the lawyers and law clerks who worked on the file, and a detailed summary of disbursements. The dockets cover client meetings, amendment to pleadings, attendances at several conferences, court appearances on motions where costs were either reserved or not addressed, ongoing document disclosure, correspondence between counsel, preparation for and attendance at questioning, and preparation for and attendance at 11 days of trial, as well as post-trial issues to implement my judgment, and preparation of costs submissions.
[85] Fees associated with the August 16, 2019 motion hearing for spousal support have appropriately been excluded from the dockets. Similarly, fees for attendance on August 13, 2019 at the Trial Management Conference (where “no costs” were ordered) have also been excluded. However, there are some docket entries in July 2019 for preparation of materials for that Conference, which I will discount.
[86] Two lawyers and three law clerks worked on the file. There was appropriate delegation of some tasks by Mr. Rosenberg to law clerks and to his associate co-counsel, but fees could have been contained by further delegation of uncomplicated tasks. The hourly rates billed by Mr. Rosenberg are reasonable given his year of call and extensive experience. The hourly rate of his associate is somewhat high relative to their year of call and will therefore be discounted. The hourly rates of the senior law clerks are sometimes justified but at other times, depending on the simplicity of tasks performed, are high and will be discounted accordingly.
[87] It appears that there was some duplication of effort. Each lawyer and law clerk spent time familiarizing themselves with the file. Mr. Rosenberg was required to review the entire history of the file (e.g., pleadings, prior endorsements, prior correspondence between counsel) when he assumed carriage from Mr. Saroli’s previous counsel. Fees associated with these duplicated efforts will not factor into my costs award.
[88] Upon review of the dockets, and taking all the relevant factors into account, I conclude that an appropriate amount of costs that should be borne by Ms. Saroli in connection with Teplitsky Colson’s fees is $120,000, inclusive of HST. This amount represents an elevated award of costs to sanction and discourage the type of litigation misconduct in which Ms. Saroli engaged. The amount is high but is proportionate to the issues in dispute and the amounts at stake.
[89] Teplitsky Colson incurred disbursements in the approximate amount of $21,000. These include standard litigation expenses (e.g., witness conduct money, courier fees, process server fees), which are reasonable and recoverable. However, there are also significant printing and photocopying expenses, as well as legal research expenses, which are part of the cost of doing business for every law firm and should not, in my view, be included in the costs award. There are significant disbursements associated with ordering court transcripts, with no explanation of why the transcripts were required. These expenses might have been recoverable if the necessity of obtaining the transcripts were explained, but with no information provided, the expenses are unjustified. Similarly, there are considerable expenses for unspecified “paralegal services”, the reasonableness of which cannot be ascertained without more information. These expenses are not, in the circumstances, recoverable.
[90] Overall, I conclude that a fair, reasonable and proportionate amount of Teplitsky Colsen’s disbursements that should be born by Ms. Saroli is $8,000, inclusive of a significant contribution toward the expert witness’s fees, and inclusive of HST.
Summary
[91] In conclusion, per the calculation below, I order Ms. Saroli to pay Mr. Saroli’s costs, in the total amount of $165,000, all inclusive.
Fees $ 33,000
Disbursements $ 4,000
(Christen Seaton Burrison Hudani LLP)
Fees $120,000
Disbursements $ 8,000
(Teplitsky Colson LLP) ________
Total $165,000
[92] Ms. Saroli argues that her financial means and ability to pay costs should be taken into consideration. She submits that although she has been diligent in her search for a new job, she remains unemployed. Given the findings I made in my Reasons for Judgment about her intentional underemployment, I am not prepared to accept that submission as a basis for reducing the award of costs. Moreover, she has the ability to pay these costs forthwith from her share of the net proceeds of sale of the matrimonial home, which are being held trust.
[93] Although the costs award in this case is high, I am not concerned about a potential negative impact on access to justice because the amount of the award is justified by the need to promote settlements in family law proceedings and by the need to sanction egregious litigation misconduct. Family law litigants with legitimate claims, who behave reasonably, have no need to worry about overburdensome cost consequences even if they do not succeed in court.
ORDER
[94] Ms. Saroli shall pay Mr. Saroli’s costs of the proceeding in the amount of $165,000, inclusive of fees, disbursements and HST. These costs shall be paid forthwith from Ms. Saroli’s share of the net proceeds of sale of the matrimonial home.
Petersen J.
Released: November 12, 2021
COURT FILE NO.: FS-14-81731
DATE: 2021 11 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
LISA SAROLI
- and -
LUCIANO SAROLI
COSTS ENDORSEMENT
Petersen J.
Released: November 12, 2021