Court File and Parties

COURT FILE NO.: FC-20-00001850 DATE: 20220311

ONTARIO SUPERIOR COURT OF JUSTICE FAMILY COURT

BETWEEN:

Anna Di Sabatino, Applicant – and – Mirko Di Sabatino, Respondent

Counsel: Belinda Rossi and Hannah Rich, for the Applicant Areesha Zubair, for the Respondent

HEARD: In writing

Decision on Costs

J. DI LUCA J.:

[1] On January 14, 2022, I issued reasons for decision in relation to Ms. Di Sabatino’s motion for interim spousal support. As set out in those reasons, I ordered interim monthly support of $19,750. I also ordered a lump sum of $256,750 for spousal support retroactive to the date on which Mr. Di Sabatino stopped voluntarily paying spousal support.

[2] The parties have now filed costs submissions, which I have considered carefully. I now provide my decision on costs along with my reasons.

[3] The applicant, Ms. Di Sabatino, seeks full recovery costs of $118,500 all inclusive based on her complete success on the motion, her Rule 18 offer to settle, and the respondent’s persistent bad faith and unreasonable conduct. In the alternative, Ms. Di Sabatino seeks partial recovery costs of $88,500.

[4] The respondent, Mr. Di Sabatino, submits that in view of his offer to settle, he should be entitled to costs, or in the alternative, there should be no costs. He argues he did not act in bad faith either in terms of the motion or in terms of the disclosure process leading up to the motion.

[5] Moreover, to the extent that his conduct in terms of the disclosure process is implicated, Mr. Sabatino submits that findings in relation to the reasonableness of his conduct should be left with the trial judge “or a judge tasked with reviewing the reasonableness” of his conduct in complying with disclosure orders.

[6] Lastly, he argues that even if costs are to be awarded to the applicant, the costs sought are excessive in comparison with the costs he has incurred in relation to the motion.

The Legal Framework

[7] The modern approach to costs in family law matters seeks to foster the following objectives: (i) to partially indemnify successful litigants for the cost of litigation, (ii) to encourage settlement, (iii) to discourage and sanction inappropriate behaviour by litigants and (iv) to ensure that cases are dealt with justly, see Mattina v. Mattina, 2018 ONCA 867 at para. 10 and Serra v. Serra, 2009 ONCA 395 at para. 8.

[8] Rule 24(1) of the Family Law Rules creates a presumption of costs in favour of the successful party. Reasonableness and proportionality are the touchstone considerations in fixing the quantum of costs, see Beaver v. Hill, 2018 ONCA 840.

[9] While success is the starting point for the analysis, the determination of quantum of costs is subject to the factors listed in Rule 24(12). It is also subject to Rule 24(8) which relates to bad faith, and Rule 18(14) which relates to offers to settle.

[10] Rule 24(12) of the Rules sets out the following considerations which serve to guide the court’s exercise of discretion in fixing the quantum of costs:

SETTING COSTS AMOUNTS

(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.

[11] Rule 24(5) of the Rules sets out criteria for determining the reasonableness of a party’s behaviour in a case, which is a factor listed in Rule 24 (12) (a) above. It provides as follows:

DECISION ON REASONABLENESS

(5) 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.

[12] Rule 24(8) applies where a party acts in bad faith. The rule directs the court to “decide costs on a full recovery basis” payable forthwith. The case law recognizes that there is a distinction between acting “unreasonably” and acting in “bad faith”, see S.(C.) v. S.(M.), 2007 ONSC 20279 at paras. 16-18 and 24, and Scalia v. Scalia, 2015 ONCA 492. While it is a question of degree, a finding of bad faith requires evidence meeting a high threshold, see D.D. and F.D. v. H.G., 2020 ONSC 1919 at para. 34. That said, a “defiant, uninformative and misleading approach to financial disclosure” may give rise to a finding of bad faith, see Benzeroual v. Issa and Farag, 2017 ONSC 6225 at para. 32.

[13] In terms of offers to settle, I note that Rule 18(14) of the Rules provides as follows:

COSTS CONSEQUENCES OF A FAILURE TO ACCEPT OFFER

(14) 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:

1. If the offer relates to a motion, it is made at least one day before the motion date.
2. 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.
3. The offer does not expire and is not withdrawn before the hearing starts.
4. The offer is not accepted.
5. The party who made the offer obtains an order that is as favourable as or more favourable than the offer.

Analysis and Findings

[14] As a starting point, I note that Ms. Di Sabatino was successful on the interim spousal support. [1] This presumptively entitles her to costs. There is no unreasonable or bad faith conduct on her part that would act to rebut this presumptive entitlement or serve to otherwise moderate the quantum of costs she is entitled to.

[15] I turn next to the offers to settle. On November 11, 2021, Ms. Di Sabatino served an offer to settle with the following key particulars: (i) monthly support of $18,000 gross (tax deductible/includable), and (ii) retroactive payment of $234,000 without prejudice. [2] The result of the motion was more favourable to Ms. Di Sabatino than her offer to settle.

[16] On November 18, 2021, Mr. Di Sabatino made an offer to settle that included, inter alia, the following term:

1. On a without prejudice basis, the Respondent will direct to transfer $240,000 from Fabrizio Di Sabatino and FB Construction to the Applicant. This amount shall not be considered as income to the Respondent, however, will be considered as spousal support periodic and/or lump sum, retroactive and/or prospective and/or an advance on equalization in the cause.”

[17] The offer to settle also provided that the Applicant’s motion for spousal support would be withdrawn.

[18] Mr. Di Sabatino argues that Ms. Di Sabatino would have done better if she had accepted his offer to settle rather than proceeding with a determination of the motion. He notes that the amount he offered would have been subject to a gross-up and therefore was the equivalent of $435,035.00. Assuming the trial in this matter would occur in the September 2022 sittings, the applicant would have received the equivalent of $20,716 in monthly support from January 1, 2021, an amount that is higher than that ordered by my decision.

[19] He further notes that the $256,000 in retroactive spousal support ordered in my decision is taxable to the applicant and as such is the equivalent of $9,943 monthly after taxes, again, lower than the amount of his offer.

[20] I am satisfied that Ms. Di Sabatino did better at the motion than both offers to settle.

[21] In terms of her offer to settle, there is no issue that she objectively did better at the motion where she was awarded monthly interim support of $19,750 back to January 1, 2021. I am also satisfied that her offer to settle was an entirely reasonable offer in the circumstances of this case.

[22] In terms of Mr. Di Sabatino’s offer to settle, it is important to note precisely what his offer purported to do. In my view, it was simply an offer to “direct” a third party to pay Ms. Di Sabatino $240,000. Based on the evidence before the court on the motion, the $240,000 related to a loan between Mr. Di Sabatino and his cousin, Fabrizio Di Sabatino. The offer to settle is not an offer to pay Ms. Di Sabatino monthly interim spousal support. Rather, it is merely an offer to re-direct a debt to her without any particulars as to how that debt is expected to be repaid, and whether it is even realistically enforceable given that it is a debt arranged between family members on the opposite side of hotly contested family litigation.

[23] Moreover, in an affidavit sworn on October 27, 2021 (before his offer to settle was served), Mr. Di Sabatino had already stated that he had directed his cousin to repay the loan to Ms. Di Sabatino and perhaps unsurprisingly, by the time the motion was heard, not a dime of this loan had been repaid.

[24] Viewed in this context, I find that Mr. Di Sabatino’s offer to settle was a hollow offer which was very reasonably rejected by the applicant. In any event, even assuming it was an actual offer to pay spousal support, it is far from clear that the offer was better than the result Ms. Di Sabatino received after the motion. First, it is unclear whether a trial in this matter will happen in September of 2022, and as such the assumed monthly “value” of support is not certain. Second, it is far from clear that the amounts received by way of debt repayment would not be included in the applicant’s income, and if that was the case, a gross-up would not be appropriate.

[25] As a result, I am satisfied that Ms. Di Sabatino has discharged her burden under Rule 18(15), and I find that she is entitled to full recovery costs from the date of her offer to settle.

[26] I turn next to the issue of Mr. Di Sabatino’s conduct in relation to the motion, and more specifically whether it amounts to bad faith. As set out in detail in my reasons for decision on the motion, Mr. Di Sabatino has been in prolonged violation of disclosure orders and related procedural orders made by Jarvis J. This litigation strategy has thwarted the applicant’s ability to get a handle on the true state of his financial affairs. It has also placed the court in the unenviable position of having to “guesstimate” his annual income for interim support purposes.

[27] Notwithstanding his repeated failures to provide required disclosure, Mr. Di Sabatino advanced the position that the motion for interim spousal support was premature as the court did not have the “complete picture” before it. He also wanted the court to accept his unsubstantiated assertions that his true financial picture was not nearly as robust as suggested by the applicant. Neither of these arguments held any sway during the motion.

[28] In my view, Mr. Di Sabatino’s conduct on the motion is manifestly unreasonable. He provided a hollow offer to settle. He attempted to capitalize on his own failures to abide by disclosure orders which he took no steps to appeal, vary or otherwise review. He had been warned in advance that his litigation strategy warranted a re-think. He persisted despite the warning.

[29] The more difficult question is whether this conduct amounts to “bad faith” as that term has been interpreted under Rule 24(8) of the Rules. There is no issue that the test for “bad faith” is onerous. There is also no issue that in certain cases, the very type of litigation strategy employed in this case may be seen as a demonstration of “bad faith.” That said, on the record before me, I am hesitant to make a finding of bad faith, at this time. If the type of conduct demonstrated by Mr. Di Sabatino continues in future proceedings on this matter, an inference of bad faith may be inescapable.

[30] I turn lastly to determining a reasonable and proportionate quantum of costs in view of my findings and the considerations listed in Rule 24(12). In determining quantum, I accept as A.J. Goodman J. explains in Miziolek v. Miziolek, 2018 ONSC 4372 at para. 32:

…[t]here must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated. I note that it is not necessary for me to have to go through the hours, or disbursements, line by line, in order to determine what the appropriate costs are. Nor is the court to second-guess the amount of time claimed unless it is clearly excessive or overreaching. I must consider what is reasonable in the circumstances, and all the relevant factors. However, when appropriate and necessary, a court ought to analyze the Bill of Costs in order to satisfy itself as to the reasonableness of the fees and expenses submitted for consideration.

[31] I have examined the respective Bill of Costs filed by the parties. Each Bill of Costs identifies the service date, a brief description of the service provided, hourly rate, time spent and amount claimed. The hourly rates charged by the lawyers, while high, are within the reasonable range.

[32] Mr. Di Sabatino’s Bill of Costs reveals 210.6 hours of legal services with a corresponding fee value of $42,061. Ms. Di Sabatino’s Bill of Costs provides details of docketed hours across a number of invoices rendered by counsel. While total hours are not set out, a total fee value of $118,636.10 (plus $620.55 for the cross-motion) is indicated. A reduction of 5% is applied for overlap in effort by different counsel within the firm.

[33] Mr. Di Sabatino argues that Ms. Di Sabatino’s lawyers essentially over-worked the file and thereby occasioned excessive costs. He points to the fees he incurred as a fair comparator to demonstrate the costs that a party might reasonably expect the opposing side to incur.

[34] In assessing the reasonableness and proportionality of the claimed costs, I note that this motion was lengthy and relatively complex. The materials compiled by the applicant were voluminous, though perhaps necessarily so. The applicant was placed in the very difficult position of having to forensically re-create the respondent’s yearly income profile from incomplete and, in a few instances, potentially misleading, disclosure. As such, the fact that applicant’s counsel required more hours and resources to prepare the motion is likely in large part a consequence of the respondent’s failure to comply with his disclosure obligations and his litigation strategy. That said, even accounting for the implications of Mr. Di Sabatino’s litigation strategy, I find that the efforts dedicated to advancing this motion are in excess of what might reasonably be anticipated given the issues at stake.

[35] When I consider all of the above factors and findings in concert with the over-arching legal principles, I find that total costs of $70,000, all inclusive, are appropriate in this case. This overall quantum of costs is moderated by the principles of reasonableness and proportionality which must ultimately reflect a just figure for a two-day interim support motion. However, this figure includes full recovery costs of $45,392.35 from the date of Ms. Di Sabatino’s offer to settle.

Order to Go

[36] Costs in relation to the interim support motion are payable to the applicant and are fixed at $70,000, all inclusive and payable within 30 days.

[37] If the respondent fails to pay these costs within 30 days, the costs shall be paid: (1) first from the funds held currently in trust by Sutherland Law in connection with the Clean Soils Services Ltd. sale transaction and repayment of related shareholder loans; and, (2) then (if the funds are not available under (1), from the proceeds of sale held in trust owing to the respondent directly or indirectly from the sale of 85 Vickers Road.

[38] If the payment of costs under this Order are traced to an asset in which the applicant has/had an interest in full or in part, the respondent shall not receive credit for such payment(s) towards the costs. In other words, the respondent shall not receive credit for any funds paid to the applicant on account of costs under this Order if any such funds are traced to an asset or source in which, and to the extent, the applicant has an interest.

[39] I decline to impose additional costs of $5,000 should the respondent not pay the costs within 30 days. I am not satisfied that the alternative mechanism of securing the costs order will result in any significant additional costs.

[40] Costs under this Order shall be enforceable as support. An S.D.O. shall issue.

[41] This Order shall be subject to interest at a rate of 2% from the date of default, or any such higher rate of interest that may be posted by the Ministry of the Attorney General pursuant to the Courts of Justice Act.

Justice J. Di Luca Released: March 11, 2022

Footnotes

[1] I note that Mr. Di Sabatino brought a cross-motion seeking various forms of relief. That motion was not pursued during argument of the interim support motion and Mr. Di Sabatino claims that the relief sought was mainly addressed through correspondence received from Jarvis J., who clarified the scope of one of his earlier orders. While the clarifying correspondence did not completely address the cross-motion, given the minimal time and effort dedicated to addressing the cross-motion, I see no need to address costs separately. Instead, in addressing the quantum of costs on the main motion, I will consider that costs of approximately $550 were incurred by Ms. Di Sabatino in relation to the cross-motion.

[2] Other particulars of the offer to settle are captured in the comparative chart set out at para. 6 of the applicant’s costs submissions.