COURT FILE NO.: 379/17
DATE: March 2, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Erica Ann Woodland
Applicant
Linda Smith Counsel
-and-
Stuart Grenville Kirkham
Respondent
Noted in default
Malcolm J.
ENDORSEMENT ON COSTS
[1] This is a decision on costs concerning the applicant mother’s application for child support for the child, L. The applicant was successful in obtaining an order of child support after an uncontested trial in July 2021 pursuant to my decision reported as Woodland v Kirkham, 2021 ONSC 8194 (the “Trial Decision”).
[2] The applicant is seeking substantial or full indemnity costs in the amount of $92,190.90 inclusive of disbursements and HST.
[3] In addition to the written submissions provided by the applicant’s counsel on December 9, 2021, counsel for the applicant provided spreadsheets of time spent, documented offers to settle and a bill of costs. The legal costs and disbursements are for the uncontested trial and additional costs that were not addressed by previous costs orders including time spent by two lawyers, an articling student, and student caseworkers all with the Queen’s Family Law Clinic (QFLC). The disbursement is for a pro bono forensic accountant.
[4] The student caseworkers with the QFLC are volunteer second- and third-year law students who assisted the lawyers involved throughout the litigation. The articling students are not volunteers but employed by the clinic. Counsel for the applicant asks for the caseworker’s time which was not addressed in any court orders for costs to be considered in determining the costs.
[5] Costs were ordered during the litigation against the respondent for the following matters: on May 30, 2019, by Trousdale J. for the motion requesting DNA paternity testing; on July 19, 2019 by Robertson J. on the motion to unseal the respondent’s financial statement; on November 19, 2020 by Swartz J on the motion for security for costs and terms for the respondent to participate in the trial and two Divisional Court orders. I note that in her order of November 19, 2020, Swartz J. ordered that the costs of $9,600 be paid to Queen’s University.
Entitlement to costs
[6] 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 r. 2 (2) of the Family Law Rules, O. Reg. 114/99 (the “Rules”): see Mattina v. Mattina, 2018 ONCA 867, at para. 10.
[7] The court must consider r. 24 of the Rules in determining an order for costs.
Successful party presumptively entitled to their costs
[8] A successful party is presumptively entitled to costs pursuant to r. 24(1). Here, the applicant has been successful in obtaining a declaration that the respondent is a parent to the child, as well as retroactive and ongoing child support based on an imputed income to the respondent. Therefore, the applicant is presumptively entitled to her costs.
Unreasonable behaviour
[9] However, if a successful party is not reasonable, they may be deprived of their costs and may be ordered to pay costs to the unsuccessful party. The court shall consider if any offer to settle was reasonable. The applicant made an extremely reasonable offer to settle on February 20, 2020, which was not withdrawn prior to trial. It was for $250,000 CDN for all retroactive and ongoing child support. My order was double that amount at $563,738 with ongoing monthly support to continue at $4,277.
Offers to settle
[10] The respondent made only one formal offer to settle in a letter to previous counsel. That offer expired in 2018 and is therefore not relevant to my consideration of costs. It was in the amount of $30,000 and was reduced each week by $5,000 until it expired on September 14, 2018.
[11] The respondent sent an email to the trial coordinator on November 17, 2020, prior to the motion before Swartz J. on Nov. 19, 2020, offering $90,000 to settle the matter. That email cannot be considered a formal offer to settle. Coincidently it was the amount of security for costs as ordered by Swartz J. on November 19, 2020.
[12] In my trial decision, I found that the applicant was reasonable in the extreme. Now knowing she made a reasonable offer to settle, I continue to find that her actions throughout these proceedings have been very reasonable and settlement oriented.
Bad faith
[13] Under r. 24(8), if a party has acted in bad faith the court shall decide costs on a full recovery basis and order those costs to be paid immediately.
[14] In the decision of F.K. v. A.K. and CAS of Hamilton, 2020 ONSC 4927, 43 R.F.L. (8th) 459, at para. 18, Pazaratz J. provided a summary of factors to consider when making a bad faith determination.
A finding of bad faith on the part of a litigant is rarely made, because it requires a high threshold. S.(C). v. S(M.), 2007 20279 (ON SC), [2007] O.J. No. 2164 (SCJ); Piskor v. Piskor, 2004 5023 (SCJ); Cozzi v. Smith, 2015 ONSC 3626(SCJ); Hum v. Skoll, 2020 ONSC 275 (SCJ).
a.The behavior 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 behavior; to conceal information relevant to the issues at stake in the case; or to deceive the other party or the court. S.(C). v. S(M.)
b. 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. Calver v. Calver, 2019 ONSC 7317 (SCJ).
c.The requisite intent to harm does not have to be the person's sole or primary intent, but rather only a significant part of the person's intent. S.(C). v. S(M.)
d.At some point a party can be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behavior is causing the other party major financial harm without justification. S.(C). v. S(M.).
e. Bad faith is not synonymous with bad judgment or negligence. Rather, it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction or obfuscation. Scipione v. Del Sordo, 2015 ONSC (SCJ); Children's Aid Society of the Region of Peel v. F. (I.J.), 2009 ONCJ 252 (OCJ); Biddle v. Biddle, 2005 7660 (SCJ); Leonardo v. Meloche, 2003 74500 (SCJ); Hendry v. Martins, [2001] O.J. No. 1098 (SCJ); Carter v. Carter, 2020 ONSC 1095 (SCJ); Jackson v. Mayerle, 2016 ONSC 1556 (SCJ); Green v. Whyte, 2019 ONSC 7133 (SCJ).
f. To establish bad faith the court must find some element of malice or intent to harm. Harrison v. Harrison, 2015 ONSC 2002 (SCJ).
g. There is a difference between bad faith and unreasonable behaviour. The essence of bad faith is when a person suggests their actions are motivated by one purpose when they are actually motivated by another purpose. It is done knowingly and intentionally. A bad faith finding on a specific issue does not necessarily have a spill-over effect to other issues. The court can order full recovery costs in relation to the portion of the proceeding where bad faith is applicable. Hunt v. Hunt, [2001] O.J. No. 5111 (SCJ). Scipione v. Del Sordo; Stewart v. McKeown, 2012 ONCJ 644 (OCJ); F.D.M. v. K.O.W. 2015 ONCJ 94 (OCJ)
h. Even where the "full recovery" provisions of the Rules are triggered by a finding of bad faith, the quantification of costs still requires an overall sense of reasonableness and fairness. The successful party is not entitled to a blank cheque. Goryn v. Neisner, 2015 ONCJ 318 (OCJ); Jackson v. Mayerle; Belair v. Bourgon, 2019 ONSC 2170; Slongo v. Slongo, 2015 ONSC 3327(SCJ).
i. The court retains a residual discretion to make costs awards which are proportional, fair and reasonable in all the circumstances. M. (C.A.) v. M. (D.); Scipione v. Del Sordo; Jackson v Mayerle.
[15] I found in the Trial Decision that the respondent made the litigation unduly long and complicated due to his failure to provide financial disclosure, to participate in DNA testing and by bringing the two failed motions for leave to appeal decisions of the court. I also found “that the respondent has denied, evaded and delayed the negotiations and the court proceedings to the financial detriment of L. and the applicant.”: see Trial Decision, at para. 31. A party may obtain enhanced costs if the party’s conduct and position is unreasonable.
[16] In Goldstein v. Walsh, 2019 ONSC 3174, 25 R.F.L. (8th) 257, at para. 2, Kristjanson J. found when bad faith and unreasonable conduct “permeated the entirety of the litigation,” and the successful party “beat [the opposing party’s] offer to settle”, the successful party was entitled to full recovery costs in the amount of $420,000.
[17] In May 2018, counsel for the respondent was seeking a consent that his client’s financial statement be sealed until the determination of paternity has been resolved. The respondent then refused to participate in paternity testing and appealed the order for testing to occur. He was ordered on March 3, 2020, to provide financial disclosure and answer questions as to his reduction in personal income and refused to do so.
[18] Persistent refusal by a party to make accurate financial disclosure and reveal their true income has in other cases led to a finding of bad faith and full costs recovery on the issues in which bad faith was found: see DePace v. Michienzi (2000), 2000 22460 (ON SC), 12 R.F.L. (5th) 341 (Ont. S.C.), at paras. 22, 26; Kardaras v. Kardaras, 2008 ONCJ 616, at para. 21; and Hakim v. Hakim, 2020 ONSC 6587, at para. 32.
[19] I find that the respondent has shown bad faith throughout this matter including an intent to inflict financial harm, conceal information and refuse to provide full financial disclosure. There may have been a few conferences where progress was made but the respondent then did not follow the orders or directions made at those conferences.
[20] The respondent’s actions were done knowingly and intentionally. He claimed he did not want to disclose income information until paternity was established but then refused to participate in the DNA testing which could determine paternity. He claimed the testing was contrary to the privacy rights of the child, but this could be remedied by requesting the use of initials for the parties in the decision. His actions, although stated for one reason, were for the purpose of delaying or derailing the proceeding. He was warned by this court and the Divisional Court that financial disclosure was required. Bad faith is established.
Setting costs
[21] As set out in Mattina, at para. 15, “The Family Law Rules only expressly contemplate full recovery costs in specific circumstances, e.g. where a party has behaved unreasonably, in bad faith or has beat an offer to settle under r. 18(14).”
[22] In this case, the respondent has been shown to have acted unreasonably and in bad faith, and the offer to settle made by the applicant was much lower than the trial decision. The applicant is entitled to her full costs subject to ensuring they are fair, proportional, and reasonable.
[23] In setting costs, the court must consider the factors in r. 24(12):
(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
[24] Counsel for the applicant provided a bill of costs and spreadsheet of all legal fees since 2016, showing 598 hours spent with a total of 346.09 hours spent by the lawyers and articling students, and 220.3 hours for student caseworkers or law clerks.
[25] I find the 126.46 hours time spent by counsel and the articling student, not included in pervious costs orders, is reasonable and proportional.
[26] Counsel asks for the 220.3 hours spent by the QFLC student caseworkers to be included in this costs order. This included time that was spent in preparation for the previous motions in which costs were awarded. The inclusion of the student caseworkers or law clerk’s time should have been requested at the time and shall not be included in this order. I cannot include their time for the time period of 2018, 2019 and 2020 which were captured by other costs orders.
[27] There is an element of education and instruction in the program which cannot be included in a costs order. Although some of the work may be the equivalent of the work of a law clerk certainly not all would be, and an experienced law clerk may be more efficient in providing some administrative services to the lawyers. There also may be work better provided by a law student such as research.
[28] Further, the spreadsheet showing the hours of the student caseworkers is somewhat difficult to follow. Some of the line items in the spreadsheet do not tell me the nature of the work or it is too general to be informative to my decision. Some of their time docketed was for weekly supervision meetings that have been accounted for in the lawyer’s time. To include this weekly supervision time for the students would be to count the time twice. Some time was spent meeting with persons unknown to me for purposes unknown. Some time was docketed for general research with no detail.
[29] However, I do accept that the work of the student caseworkers was necessary for the preparation of the uncontested trial and without it the lawyer’s fees would have been more. In looking at the time spent and eliminating supervision meetings or time not adequately described, the time spent after the November 19, 2020, order of Swartz J. was 26.54 hours. Counsel spent 54.22 hours in preparation for the uncontested hearing and costs submissions.
[30] If the spreadsheet or bill of costs was more detailed, I may have included the time spent in preparing the application but indicating, for example, “preparing documents” or “attending wrap up meeting” is not sufficient. I did include the time spent in preparing the timelines, the Factum, the questions for examination in chief, and the memo regarding child support with income over $150,000. I also included the time to digitize the file which was required.
[31] As in Dybongco-Rimando Estate v. Jackiewicz, 2003 7541 (Ont. S.C.), law clerk fees can be appropriate especially in complex matters. This matter was a complex matter, and the student caseworkers did aid counsel at trial.
[32] In TransCanada Pipelines Ltd. v. Potter Station Power Ltd. Partnership, 2002 CarswellOnt 1474 (Ont. S.C.), at para. 8, Lane J. considered that “The assignment of tasks to support personnel with lower rates may appear to increase the hours but may in fact be the most cost-effective approach.” The court did go on to decide that the hours were unreasonably high. I also have reduced the hours spent by the student caseworkers.
[33] I accept that the work of the students was the equivalent of a law clerk regarding the preparation for the hearing for the time that I have accepted as reasonable. The Law Society of Ontario’s suggested Fee Schedule includes the work of law students as well. The student caseworkers assisted in drafting the Factum, preparing questions for examination in chief, conducting legal research and they prepared a very helpful chronological summary. I will allow 26.54 hours for the student caseworkers. I note this is approximately one half of the hours spent by counsel. Although this in not a perfect mathematical calculation, I find it fair, reasonable, and proportional with the information I have been provided. I shall reduce the hours requested for the student caseworkers from 220.3 hours to 26.54 hours.
Fees to be determined
[34] At the motion on the issue of paternity testing, counsel for the respondent took the position that the lawyer’s fees or hourly rate claimed should be less than counsel’s private rate as the applicant was legally aided. In her decision reported at W. v. K., 2019 ONSC 3341, at paras. 18-19, Trousdale J. considered Ramcharitar v. Ramcharitar (2002), 2002 53246 (ON SC), 62 O.R. (3d) 107 (S.C.).
[35] In Ramcharitar, at para. 25, Wein J. explained costs should not be less simply because the applicant received legal aid:
[T]he party paying the costs simply pays the same amount as they would if the client were not legally aided. In fact, to hold otherwise would grant an inadvertent windfall to the party fortunate enough to only have to pay costs to an opposing party on Legal Aid, since the rates would be accordingly reduced.
[36] In W. v. K., at para. 20, Trousdale, J. found that “there is no need for any fee arrangement between the clients and Legal Aid to be disclosed. I find that the relevant billing rate to determine costs in the case before me is the private rate of the solicitor.”
[37] In Persaud v. Persaud, 2018 ONSC 3024 the court cites the 1998 Legal Aid Services Act to support the proposition that cost awards for a legally aided party should not be lower than a non-legally aided party. That Act was repealed in October of 2021 and a new act was enacted: see Legal Aid Services Act, 2020, S.O. 2020, c. 11, Sched. 15. Section 12 of that new Act states as follows:
Costs orders by court unaffected by legal aid services
12 (1) The costs awarded in any order made in favour of an individual who has received legal aid services are recoverable in the same manner and to the same extent as though awarded to an individual who has not received legal aid services.
Same
(2) Subsection (1) applies even if,
(a) no part of the cost of the legal aid services provided to the individual in whose favour the order is made has been contributed or is or will be contributed to the Corporation by the individual or by a person responsible for the individual; or
(b) the costs ordered are in excess of the total amount contributed or to be contributed to the Corporation by the individual, or by a person responsible for the individual, for the cost of the legal aid services provided to the individual.
Costs payable to Corporation
(3) Costs ordered by a court to be paid to an individual in a proceeding in which the individual received legal aid services are, to the extent of the legal aid services provided to the individual in the proceeding, the property of the Corporation and shall be paid to the Corporation.
[38] The decision of A.P. v. L.K., 2021 ONSC 1054 adopts the decision of 1465778 Ontario Inc. et al. v. 1122077 Ontario Ltd. et al., 2006 35819 (ON CA), 82 O.R. (3d) 757 as to legal work undertaken on a pro bono basis. The court holds, at para. 19:
[T]he most important purpose of a costs award that can be advanced here is to ensure that this case is dealt with justly, which, in my view, includes promoting access to justice by allowing pro bono counsel some recovery. A costs award will also provide some measure for indemnity to the appellant, who did incur some costs in the arbitration and at the outset of the appeal. It will also underscore that litigants in cases where the opposing party is represented pro bono are not immune from normal costs consequences.
[39] I find that this analysis also extends to the work of the student caseworkers. To not include their time in a costs order would also provide a windfall to the respondent as his costs would be less.
[40] The respondent also spent considerable money in defending this matter as he indicated in an email to the court. I have no bill of costs from the respondent’s previous counsel, but I expect the hourly rate was the same or more than the applicant’s counsel. Ms. Smith, counsel for the mother, has 27 years of experience; an hourly rate of $350 is extremely reasonable and in accordance with The Law Society of Ontario’s suggested Fee Schedule. The amount of $21,444 as requested is reasonable and proportional.
[41] The hourly rate of $350 per hour for Ms. McGrath, another lawyer in the clinic who has 21 years in practice and who assisted Ms. Smith, is also reasonable, proportional and in accordance with the Fee Schedule.
[42] The hourly rates for the student-at-law at $130 is also reasonable. It is the average between a law clerk or law student at $90 and a junior lawyer at $165. The amount of $15,072 for the time of Ms. McGrath and Ms. Law (the student-at-law) is reasonable and proportionate.
[43] I find that $90 per hour for law clerks or law students is reasonable and is the rate set out in the suggested Fee Schedule. Therefore, the allowable fees shall be set at $2388.60 for the student caseworkers’ work for the uncontested hearing.
Disbursement for accountant fee
[44] The applicant asks for costs for the forensic accountant who was working pro bono. The courts have ordered costs in favour of pro bono counsel in 1465778 Ontario Inc. et. al v. 1122077 Ontario Ltd. et. al. (2006), 2006 35819 (ON CA), 82 O.R. (3d) 757 (C.A.), and counsel for the applicant asks that this be extended to the work of other professional in support of the litigation.
[45] At paras. 34-35, of the decision the court held:
…in the current costs regime, there should be no prohibition on an award of costs in favour of pro bono counsel in appropriate cases. Although the original concept of acting on a pro bono basis meant that the lawyer was volunteering his or her time with no expectation of any reimbursement, the law now recognizes that costs awards may serve purposes other than indemnity. To be clear, it is neither inappropriate, nor does it derogate from the charitable purpose of volunteerism, for counsel who have agreed to act pro bono to receive some reimbursement for their services from the losing party in the litigation.
To the contrary, allowing pro bono parties to be subject to the ordinary costs consequences that apply to other parties has two positive consequences: (1) it ensures that both the non- pro bono party and the pro bono party know that they are not free to abuse the system without fear of the sanction of an award of costs; and (2) it promotes access to justice by enabling and encouraging more lawyers to volunteer to work pro bono in deserving cases. Because the potential merit of the case will already factor into whether a lawyer agrees to act pro bono, there is no anticipation that the potential for costs awards will cause lawyers to agree to act only in cases where they anticipate a costs award.
[46] I find this is a reasonable request to extend costs of the pro bono expert’s report and testimony in this case.
[47] It is also within the court’s discretion to order under r. 24(12)(a)(v) expert’s fees paid or payable and (b) any other relevant matter. If the costs are not compensated an unreasonable litigant acting in bad faith, as I have found the respondent to be in this case, will be successful in causing the expert being out-of-pocket for their reasonable costs.
[48] Further, in the case of DCR Strategies Inc. v. Gomez, 2021 ONSC 8343, at para. 30, the court allowed disbursements included in the work of the amicus curiae appointed by the court. The work of the forensic accountant is a disbursement to the work of the applicant’s counsel and should be compensated.
[49] On March 3, 2020, the respondent was ordered to provide further financial information including answering questions about the substantial drop in his personal income after the litigation was commenced. He did not provide that disclosure and a business valuation of his professional income was never completed as a result. The report and testimony of Connor Paxton, a forensic accountant, was very helpful to the court and its decision.
[50] Except for a few items, the fees and time spent are very reasonable. In the expert’s bill of costs there are references to speaking with a partner that does not appear to be related to the report or evidence at the hearing. Therefore, the request for $27,443 shall be reduced to $25,000 inclusive of HST.
[51] In Goetz v. Kay, 2020 ONSC 924, at para. 43, Kiteley J. addressed how costs would be paid with reference to the Federal Court ruling in Abdelrazik v. Canada, 2009 FC 816, as follows:
I do agree with the Appellant’s submission based on the decision by the Federal Court that this Court must be satisfied that there is an arrangement between the litigant and his counsel that any costs awarded will be paid over to the counsel. In Abdelrazik, one of the pro bono counsel had confirmed that the Appellant had made that agreement.
[52] In EAL-57778-16 (Re), 2016 106392 (ON LTB) the landlord-tenant board held that the unsuccessful party was to pay directly the successful party’s lawyer or their legal clinic.
[53] From my review of the spreadsheet and bill of costs I am aware that the previous orders of costs that were paid by the respondent were provided to counsel or the QFLC. Further the order of November 19, 2020, ordered those costs be paid to Queen’s University. The applicant will not have a windfall due to an order of costs.
[54] The disbursements other than the accountant’s fees are not itemized in the bill of costs and appear to relate to matters that were previously addressed in other costs orders so I will not include them in this costs order.
Summary
[55] The applicant asks for $92,190.90 inclusive of disbursements (the forensic accountant’s costs) and HST. With the $2,742.75 reduction from the disbursement (forensic accountant) and $20,0015.60 reduction for the student caseworker’s fees, costs shall be awarded at $69,432.24 inclusive of disbursements and HST.
[56] If counsel requests that the costs are to be paid to Queen’s University, the order shall issue in that form.
Order
[57] The respondent shall pay to the applicant, or as her counsel directs in writing, the sum of $69,432.24 within 90 days.
Justice W. Malcolm
Released: March 2, 2022