Court File and Parties
COURT FILE NO.: FS-20-00014739 DATE: 2022-01-11 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SHIRIN HABIBI, Applicant AND: PARHAM AARABI, Respondent AND: SHAHRZAD ROYA SEDIGHTEHRAN a.k.a. Roya Sedightehran, a.k.a. Roya Sedigh a.k.a. Roya Arabi, in her personal capacity, and in her capacity as Trustee of the 2016 Aarabi Family Trust and the Roro Family Trust ABOLGHASSEM ARABI PEGAH AARABI MICHAEL KERLEY AARABI INVESTMENT HOLDINGS INC. M2 VENTURES INC. A.K.A. MODIFACE HOLDINGS INC. (Added Respondents affected by Mareva Order)
BEFORE: Kimmel J.
COUNSEL: Jaret N. Moldaver/K. Prehogan/L. Konkol/Claire McNevin/Nadia Chiesa/, for the Applicant Gary Joseph/Will Abbott/Julia McArthur for the respondent Parham Aarabi, Aarabi Investment Holdings Inc. and M2 Ventures Inc., a.k.a. Modiface Holdings Inc. Geoff Hall/Mark Greenstein/Ashley F. Krol/Katie Hunter/Natasha Rambaran, for the respondent Roya Sedightehran George Karahotzitis/Camelia Amiri, for the respondent Abolghassem Arabi Daniel Melamed and Justyna Waxman, for the respondents Pegah Aarabi and Michael Kerley
HEARD: June 23, 2021 (Supplementary written cost submissions dated November 19, 2021 and December 3, 2021)
Costs Endorsement – Ex Parte Injunction and Come Back Motion
[1] A come back motion was heard on June 23, 2021, approximately a year after the court granted ex parte orders in favour of the applicant Shirin Habibi (“Shirin” or “wife”) following an urgent hearing held on June 10, 2020. The orders were made under r. 14(12) of the Family Law Rules, O. Reg. 114/99, against her former spouse, the respondent Parham Aarabi (“Parham” or “husband”) pursuant to sections 12 and 40 of the Family Law Act, R.S.O. 1990, c. F.3 (the “FLA Preservation Order”) and against certain of his immediate family members and various corporate affiliates and trusts (the “Aarabi Family and Affiliates” [1]) pursuant to section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “Mareva Order”) by order of Diamond J. dated June 10, 2020 (together, the “ex parte Injunction Order”).
[2] Following the come back motion, this court continued the FLA Preservation Order against the husband, but dissolved the Mareva Order: see Habibi v. Aarabi, 2021 ONSC 5574.
Summary of the Outcome of the Come Back Motion
[3] The respondents estimated that the ex parte Injunction Order originally impacted collective assets that were frozen and that were valued in excess of $50 million. Even after the applicant voluntarily agreed to the release of some funds and assets over the course of various evidentiary disclosures made by the respondents, and in the context of various adjournments of the come-back motion, the respondents still estimated at the time of the hearing that $40 million worth of funds and assets continued to be frozen by the FLA Preservation Order and Mareva Order.
[4] Prior to the granting of the FLA Preservation Order and Mareva Order on June 10, 2020, the husband and wife had consented to a mutual preservation order signed by Paisley J. on April 7, 2020 of a much narrower scope (the “Consent Preservation Order”). That prior order was disclosed to the court when the wife applied for her ex parte Injunction Order on June 10, 2020.
[5] The court was satisfied at the come back hearing that the wife had demonstrated a serious issue to be tried on her claim for a substantial equalization payment that exceeded the assets disclosed on the husband’s April 8, 2020 financial statement. In the wake of the husband’s disposition of tens of millions of dollars during the two years prior to this financial statement (including significant dissipation of share sale proceeds from his original 80% shareholdings in the company he established and owned with his mother, Modiface [2]), the court concluded that the balance of convenience favoured preserving whatever assets he currently has (and has had since the FLA Preservation Order was made) to satisfy whatever equalization entitlement the wife may eventually establish.
[6] Accordingly, the court determined it was appropriate to continue the FLA Preservation Order made pursuant to ss. 12 and 40 of the FLA imposing an obligation on the husband to preserve/freeze his remaining property and to restrain any further depletion of it that could impair or defeat the applicant’s FLA claims. This includes all assets held directly by the husband as well as the $6,393,811 in assets that his mother acknowledges she holds in trust for him. The combined estimated total value of assets that remain frozen pursuant to this order is approximately $10.8 million.
[7] The court found that the applicant was justified in bringing an urgent ex parte motion for the freezing and preservation of assets based on the disclosures that had come to light at that time. The court also found that there had been some issues with the timing of disclosure by the respondents, including with respect to the arrangement regarding the $15 million gift from the husband to his father (Abolghassem Arabi), and an initially undisclosed Deed of Gift and undocumented trust arrangement involving these same funds and the husband’s sister (Pegah Aarabi) that the court was not satisfied had been adequately explained by the respondents.
[8] The applicant was able to establish a strong prima facie case in respect of some but not all of the pleaded causes of action against the other respondents for alleged fraudulent conveyances, sham trusts, and civil conspiracy. These claims involve the following:
a. Fraudulent conveyances involving the distribution of at least some of the tens of millions in USD proceeds from the sale of Modiface; and b. That the 2016 Aarabi Family Trust was either a sham trust or was established as part of an attempt to take Parham’s assets out of Shirin’s reach.
[9] Even though the applicant’s claims were found to be serious, and she demonstrated a strong prima facie case in respect of some of the causes of action alleged, the applicant was not able to satisfy the court de novo at the come back hearing a year later that she met the test for the continuation of the Mareva Order against the Aarabi Family and Affiliates. The applicant did not demonstrate that there was a risk of dissipation or removal of assets from the reach of the court by the Aarabi Family and Affiliates to justify the continuation of the Mareva Injunction. In particular, the funds conveyed to the Aarabi Family and Affiliates were shown, on the evidence subsequently filed by them, not to have been dissipated by the recipients between the time of the conveyances in the early part of 2018 and the ex parte Mareva Injunction in June of 2020.
[10] The respondents accused the applicant of various non-disclosures as part of their argument in support of the dissolution of the ex parte Injunction Order. Ultimately, the decision to dissolve (or deny the continuation of) the Mareva Order was not made on the basis of any alleged non-disclosures by the applicant at the time the ex parte Injunction Order was made.
[11] Most of the other procedural grounds raised by the respondents for the dissolution of the ex parte Injunction Order were not validated. The overbreadth of the original order was noted to be a concern, but it was also noted that the applicant appeared to have acted reasonably in agreeing to scale back the scope of that order based on disclosures and requests made by the respondents.
The Parties’ Positions on Costs
[12] The parties exchanged their bills of costs with each other. They were encouraged to try to resolve the issue of costs, but they were unable to do so. The court provided subsequent directions regarding their written cost submissions, which were exchanged on November 19, 2021 and December 3, 2021.
Costs of the Come Back Motion
[13] The costs of the come back motion include all costs associated with the initial ex parte Injunction Order and all subsequent steps taken by the applicant in connection with her efforts to continue that order, and by the respondents in their efforts to have it dissolved. [3]
The Applicant’s Position
[14] The applicant’s primary position is that the court should exercise its discretion under r. 24(10)(b) of the Family Law Rules to reserve the costs of the come back motion to the trial judge, who she suggests will be best positioned to determine the extent and culpability of the respondents’ actions, and therefore the fair attribution of costs, given that the court found there was a strong prima facie case against them on certain causes of action arising from the husband’s transfers of millions of dollars to the other respondents (Aarabi Family and Affiliates): see Veneris v. Koh Veneris, 2018 ONSC 4164, at para. 58; S.E.S. v T.J.B., 2021 ONSC 3125, at paras. 14–17.
[15] The wife argues that, although this is an exception to the general rule, the court can and should exercise its discretion to defer costs where the fair attribution of costs will be better determined in view of the complete facts that will be known after the completion of the trial. She also relies upon her claimed inability to pay the significant costs that the respondents are seeking against her.
[16] In the alternative, the wife says she is entitled to costs against the husband for her success in having the FLA Preservation Order continued against him. She seeks all inclusive costs of $262,733 from him, which represents an estimated 50% of her total substantial indemnity fees that she attributes to the time and effort associated with the continuation of the FLA Preservation Order. She is not claiming the other 50% of her legal fees associated with the Mareva Order that the court dissolved, and she has reduced the claimed fees associated with certain steps in recognition that some of the time (and corresponding fees) can be applied towards the determination of the issues on their merits at the eventual trial.
[17] The wife maintains that she acted reasonably in connection with the ex parte Injunction Order, even if it was partially dissolved a year later. The wife points to her December 11, 2020 settlement offer that asked the husband to agree to the continuation of the FLA Preservation Order affecting his assets. She says this was severable in that it was open to the husband to accept the offer even if the other respondents did not agree to the continuation of the Mareva Order freezing their assets. She contrasts this with the respondents’ collective June 15, 2021 settlement offer, which she maintains was not severable. She maintains that the husband’s failure to accept this offer reflects upon the reasonableness of the husband’s conduct in the litigation; as does the court’s finding of a strong prima facie case against all of the respondents in connection with the husband’s transfers of millions of dollars to the Aarabi Family and Affiliates, which was the impetus for the ex parte Injunction Order.
[18] Ultimately, she relies on her inability to pay costs to the Aarabi Family and Affiliates who were successful in having the Mareva Order dissolved.
The Respondents’ Positions
[19] All of the respondents reject the applicant’s suggestion that the court should reserve the costs of the come back motion to the trial judge. They contend that their entitlement to costs, and the amount, should be promptly decided on a motion such as this where the issues on the motion are primarily spent (having regard to the injunction test, only part of which depends on the merits of the applicant’s ultimate claims, and much of which was decided on the basis of other aspects of the test for the continuation of the ex parte Injunction Order).
[20] The husband suggests that there was divided success as between himself and Shirin insofar as his assets were implicated under both the FLA Preservation Order and the Mareva Order, but only the FLA Preservation Order was continued. He contends that he was “more successful” (particularly when the parties’ respective settlement positions are considered) and seeks all inclusive costs from the applicant of $100,000 for the come back motion.
[21] The husband also argues that, even though he did not “beat” any of his settlement offers, they demonstrate that he was acting reasonably, and this should be considered. For example, by his December 14, 2020 offer to settle, even though it was superceded by an omnibus offer from all of the respondents made on June 15, 2021.
[22] The Aarabi Family and Affiliates against whom the Mareva Injunction was originally granted are all seeking costs from the applicant, on the presumptive basis that they were successful in having this order dissolved, as follows:
a. The husband’s sister and her husband Michael Kerley are asking for the all inclusive costs of $146,902.83, comprised of partial indemnity costs of $10,393.11 up to the date of their settlement offer made on June 15, 2021 (offering that the respondents would collectively freeze assets valued at $22 million, that they say they beat in the eventual outcome) and $136,507.72 in full indemnity costs thereafter; b. The husband’s father is seeking his substantial indemnity costs up to September 21, 2020 (the date of his offer to freeze the $15+ million in funds gifted to him by the husband) and his full indemnity costs thereafter, for a combined total of $129,066.46 (or alternatively, substantial indemnity costs to June 15, 2021, the date of the respondents’ collective settlement offer to collectively freeze assets valued at approximately $22 million, and full indemnity costs thereafter, for a combined all inclusive total of $114,236.09); and c. The husband’s mother (and certain Aarabi Family and Affiliates associated with her) seek all inclusive costs of $398,446.58, comprised of partial indemnity costs up to December 14, 2020 (when she offered to preserve assets valued at $6,393,811, that she acknowledged she was holding in trust for her son) and full indemnity costs thereafter. She also relies upon the June 15, 2021 settlement offer by the respondents to collectively freeze assets valued at approximately $22 million, which is more than the net effect of the court’s determination to continue the FLA Preservation Order and freeze the $6,393,811 in assets she holds in trust for the husband, with a combined estimated value of approximately $10.8 million.
[23] The Aarabi Family and Affiliates emphasize the importance and complexity of the issues on this come back motion with regard to the breadth and implications of the ex parte Mareva Injunction Order that the applicant obtained against them and that remained in place for over a year.
[24] The husband’s sister and her husband Michael Kerley emphasize that the applicant’s behaviour was particularly unreasonable in relation to them, having sought and obtained an order freezing their home and other assets that they contend ought never to have been covered by the ex parte Injunction Order, which assets the wife only agreed to release after a period of time.
Costs of Prior Motions
[25] The applicant also seeks all-inclusive costs of $25,606 for an in-writing refusals motion. The costs were reserved to the judge hearing the come back motion by the court’s June 10, 2021 endorsement on this earlier motion. These claimed costs are comprised of what the wife has determined to be her full indemnity costs for the undertakings component of this motion and her partial indemnity costs for the refusals part of this motion (some of which were ordered answered and some of which were not). She claims success on this motion and argues that the husband’s conduct unduly complicated and delayed the determination of the issues.
[26] The husband says these costs of the applicant are inflated and that she was only partially successful, only certain refusals having been ordered answered after he agreed to answer the undertakings. He claims his costs for the aspects of this motion that he was successful on in the all-inclusive amount of $2,300. The husband also claims $2,000 in costs for a previous motion decided by Nakonechny J. on December 9, 2020.
[27] Although not specifically broken out, the husband’s mother participated in the refusals motion, which led to an order that some but not all of the refusals be answered. It is assumed that she has included the fees and disbursements associated with this motion in her overall bill of costs.
Summary of Costs Claimed
[28] All told, the respondents collectively are seeking $778,747 in costs from the applicant and the applicant is seeking just under $290,000 in costs, primarily from the husband, although she seeks to hold his mother responsible for some of the costs of the refusals motion. The principles that I have considered and applied (based on the parties’ cost submissions) in determining the parties’ respective entitlements to, and quantum of, any award of costs are detailed in the next section of this endorsement (Guiding Rules and Principles).
Guiding Rules and Principles
General Cost Principles
[29] I have adopted, and slightly amplified, the summary of general principles from the applicable rules and leading cases in the family law context, which have been conveniently summarized in paragraphs 4 through 7 and 9 through 11 of the initial cost submissions of the respondent husband, as follows:
a. Section 131 of the Courts of Justice Act provides that awarding costs is at the discretion of the Court. Rule 24 of the Family Law Rules provides a court with discretion to award costs in the amount that is just in all the circumstances after taking into account the factors set out in Rule 24(12), which direct the court to consider, among any other relevant matter, the reasonableness and proportionality of each party’s behaviour, settlement offers, time spent, legal fees (including the number of counsel and their rates), experts, and other expenses in relation to the importance and complexity of the issues. b. Modern cost rules not only indemnify litigants and encourage settlements; they sanction behaviour that increases the duration and expense of litigation or that is otherwise unreasonable or vexatious: Fong v. Chan, 46 O.R. (3d) 330 (C.A.), at para. 22; Serra v. Serra, 2009 ONCA 395, at para. 8; Blanchard v. Walker, 2012 ONCJ 799, at para. 15. c. Two cases from the Court of Appeal for Ontario, Beaver v. Hill, 2018 ONCA 840, 143 O.R. (3d) 519, at paras. 9–13 have comprehensively laid out the principles to be applied with respect to costs in family law matters. The relevant rules are as follows: i. In family law matters, judges are not constrained to the normal scales of costs found in the Rules of Civil Procedure; ii. The Family Law Rules expressly provide that, depending on the conduct of the parties and the presence or absence of offers to settle, a judge may increase or decrease what would otherwise be the appropriate quantum of costs awarded; iii. There is no provision in the Family Law Rules that provides for a general approach of “close to full recovery” costs; iv. Rule 24(12) sets out the appropriate considerations in fixing the quantum of costs in a family law matter; v. Proportionality and reasonableness are the touchtone considerations to be applied in fixing the amount of costs. See also Mattina v. Mattina, 2018 ONCA 867, at paras. 9–18.
Divided Success
[30] The husband relies on r. 24(6) of the Family Law Rules, which allows the court to apportion costs as considered appropriate if success is divided but one party is markedly more successful than the other. This 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 that required adjudication. There is a presumption that each party is entitled to costs on the issues where they succeeded, but the court may also in those circumstances “award costs to the party who was more successful on an overall global basis or on the primary issue, subject to adjustments that the court may consider appropriate having regard for the lack of success on secondary issues and any other factors relating to the litigation history of the case” see E.L. v. N.R., 2017 ONSC 5406, at paras. 13–14; Beckett v. Beckett, 2010 ONSC 2706, at para. 22; Boland v. Boland, 2012 ONCJ 239, at para. 2.
[31] Divided success may require a comparative analysis. Almost all family cases have multiple issues; however, not all issues are equally important, time-consuming, or costly to determine. The Court should analyze the following factors:
a) How many issues were there? b) How did the issues compare in terms of importance, complexity, and time expended? c) Was either party predominantly successful on more of the issues? d) Was either party more responsible for unnecessary legal costs?
See J.Y. v L.F.T., 2017 ONSC 6039, at para 11.
[32] The success of a party may also be assessed by taking into account how the order on the motion compares to any settlement offers that were made: see Lawson v. Lawson, at para. 11. This may also be a factor that the court considers when assessing the reasonableness of a party’s behaviour.
The Behaviour of the Parties
[33] Rule 24(12)(a)(i) of the Family Law Rules requires the court to consider each party’s behaviour in setting the amount of costs. Rule 24(4) further provides that a successful party who has behaved unreasonably may be deprived of all or part of their own costs or ordered to pay all or part of the unsuccessful party’s costs.
[34] Some of the authorities cited by the parties that deal with the cost implications of the court concluding that a party behaved unreasonably, or even acted in bad faith, are as follows:
a. A court’s view of reasonable litigation conduct is gauged over the totality of a proceeding. The court can order costs on a higher scale to express disapproval of unreasonable conduct. Put another way, the amount of costs ordered may be higher where a party has had to incur unnecessary added expense due to the other party’s unreasonable conduct: see John v. John, 2020 ONSC 6437, at para 41; O’Brien v. Chuluunbaatar, 2019 ONCJ 882, paras. 44–46. b. Even where behaviour falls short of being bad faith, where unfounded allegations significantly complicate a case or lengthen the trial process, this may constitute unreasonable behaviour relevant to the costs determination. Family law litigants are responsible and accountable for the positions they take during litigation: see Jackson v. Mayerle, 2016 ONSC 1556, at para. 64. c. Costs may be awarded on a higher scale to express the court’s disapproval of unreasonable conduct. See Mooney v. Fast, 2013 ONCJ 584, at paras. 30, 32, 34, in which the court observed that, in relation to a costs order:
Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly for the purposes of this case, oblivious to the mounting costs of the litigation.
One of the purposes of costs is to change behavior. The justice system is a precious public resource. Access to the justice system by individuals must be balanced with the need to ensure that the resource is available for all those who need it. This is one of the purposes of Rule 2.
… Unless courts discourage this behavior, it will continue and increase. Orders for costs are one way to discourage this behavior. [Citations omitted.]
Costs Should be Fair, Reasonable, and Proportionate
[35] Any cost award should reflect what the Court views as a fair and reasonable contribution by the unsuccessful party to the successful party, rather than any exact measure of the actual costs to the successful party. In deciding what is fair and reasonable, the expectation of the parties concerning the quantum of a costs award is a relevant factor: Zesta Engineering Ltd. v. Cloutier, at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 188 O.A.C. 201 (C.A.), at para. 38.
[36] Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 also sets out several factors that the court may consider in the exercise of discretion, including the following factors that are relevant to this case:
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer; (0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed.
[37] The reasonable expectations of the unsuccessful party may be informed by considering the quantum of costs incurred by the unsuccessful party: see Boucher, at para. 38; United States of America v. Yemec, at para. 3.
The Ability of the Unsuccessful Party to Pay Costs
[38] The applicant is facing requests for costs from parties opposite that are represented by four different sets of counsel, each for a significant amount. It is acknowledged that the court may take into consideration the (in)ability of the applicant to pay costs. This can be relevant to both her liability to pay costs and the quantum awarded: see Murray v. Murray (2005), 79 O.R. (3d) 147 (C.A.), at paras. 3–4 and 6. An overly burdensome costs award should not serve as a deterrent for a litigant’s pursuit of legitimate claims: Thompson v. Drummond, 2018 ONSC 4762, at para. 9.
[39] Ability to pay is an evidentiary consideration. The eventual determination of what equalization the applicant may be entitled to is a question for another day. The record for this motion contained calculations that provide a number of different equalization scenarios for the wife, based on the financial available financial disclosure and other factual predicates. Leaving aside the entitlement issue, these calculations disclosed that the applicant’s worst case scenario will likely result in an equalization payment far in excess of the costs awards made against here herein: see M. (C.A.) v. M. (D.), 67 O.R. (3d) 181 (C.A.), at para. 34, cited with approval in Taylor v. Schultz, 2021 ONSC 334, at paras. 33-34, and 36. The wife’s 50% interest in the matrimonial home is also valued in excess of the costs. However, these are not liquid assets to which she currently has access, however.
The Relevance and Effect of Settlement Proposals
[40] Rule 24(5) of the Family Law Rules requires the court to examine the reasonableness of a party’s behaviour with regard to settlement offers made and received. Rule 18(14) specifically addresses the consequences of an outcome that is as favourable or more favourable than the outcome under a settlement offer that meets the requirements of that rule.
[41] Each of the parties have a slightly different take or emphasis on how settlement proposals can influence the court’s exercise of discretion when it comes to awarding costs:
a. The Aarabi Family and Affiliates argue that they each made more than one offer and that their offers met the strict requirements of r. 18(14), having been made in advance of, and remaining open until, the hearing of the come back motion, which offered an overall outcome that was as favourable or more favourable to the applicant than what the court ultimately ordered as against each of them. They say this entitles them to their costs up to the date of their respective offers, and full recovery of costs incurred thereafter: i. The husband’s sister and her husband Michael Kerley seek partial indemnity costs up to the date of their first offer (August 27, 2020), and full indemnity costs thereafter; ii. The husband’s father seeks substantial indemnity costs up to the date of his first offer (September 21, 2020; or alternatively up to the date of the respondents’ global June 15, 2021 offer) and full indemnity costs thereafter (after backing out some costs acknowledged to be useful for trial purposes); iii. The husband’s mother (and affiliates) seeks partial indemnity costs up to the date of her first offer (December 14, 2020) and full indemnity costs thereafter; b. The husband’s offers were to freeze assets valued at less than what the court ultimately preserved by the continuation of the FLA Preservation Order, and thus did not meet the strict requirements of r. 18(14): see: Studerus v. Studerus, 2014 ONSC 2223, at para. 14; Goffi v. Goffi, 2019 ONSC 2160 at para. 36. c. The husband acknowledges that he did not make a settlement offer that met the strict requirements of r. 18(14). He argues that, in determining both entitlement to and the quantum of costs an important consideration is whether any party has served an offer to settle. Non-Rule 18(14) offers can be considered in arriving at a cost award: Wilson v. Kovalev, 2016 ONSC 163, at para. 26. 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. What is required is a general assessment of the overall comparability of the offer as contrasted with the order: see Wilson, at para. 25; Lawson, at para. 11. d. The respondents all argue that, on a global basis, they offered to continue preserving assets in the amount of CAD $21,926,550 in their June 15, 2021 offer to settle. This included the husband’s assets, such as the husband’s interests in: M2 Ventures at 7 St. Thomas Street, Unit 502, Toronto, Ontario; the matrimonial home at 229 Glenrose Avenue, Toronto, Ontario; and 317 Rolling Hills Avenue, San Mateo, California, U.S.A. He estimates that these properties had a value of approximately (net) $4,000,000. His few remaining frozen bank accounts, not included in the offer, were valued, as of the date of Parham’s sworn financial statement dated April 19, 2021 (not accounting notional disposition costs on the taxes from the withdrawal of the RRSP accounts) at $34,409.55. e. The wife argues that these settlement offers that the husband relies upon were combined with the offers from the other respondents and therefore, not severable or capable of acceptance just in relation to his claims. f. In contrast, the wife maintains that her offer, seeking the continuation of the FLA Preservation Order as against the husband, which the court ordered on the come back motion, was severable and open for the husband to accept, but he failed to do so.
[42] Ultimately, the aggregate value of frozen assets after the come back motion was less than this respondents’ global offer to freeze assets valued at approximately $22 million because only the husband’s assets were implicated in the FLA Preservation Order that was continued. According to the respondent, Roya Sedightehran’s, calculations, the court’s order on the come back motion required the respondents to preserve a total of $10,080,467.20, which is comprised of:
a. $6,393,811 of funds from Roya that she says were held in trust for Parham; and b. $4,058,364.33 [4] in assets belonging to the husband.
Analysis of Competing Claims for Costs
[43] The competing claims for costs will be addressed in turn.
Should Costs be Deferred to the Trial?
[44] The wife was not successful in her efforts to continue the Mareva Order. She suggests that the costs of the Aarabi Family and Affiliates, who were successful in that aspect of the come back motion, be reserved to the trial judge.
[45] I do not consider this to be one of the exceptional situations in which the court should defer the determination of entitlement and quantum of costs on an interlocutory motion to the trial: see Fyfe v. Jouppien, 2012 ONSC 97, at para. 16.
[46] The decision to dissolve the Mareva Order was based on aspects of the test that were not dependent upon the ultimate merits of the applicant’s claims (instead, that decision was based on the absence of an established risk that assets would be removed from the reach of the court should the applicant be successful at trial). Regardless of the outcome of the claims at trial (and even if it turns out that the Aarabi Family and Affiliates are culpable for their involvement in the alleged fraudulent conveyances and sham trusts), the court determined that the continuation of the Mareva Order as against the Aarabi Family and Affiliates was not warranted.
[47] Although she presumably would have also been willing to defer any entitlement to costs in respect of the continuation of the FLA Preservation Order, the applicant has not asked that any costs to which she may be found entitled in relation to the FLA Preservation Order be deferred if the costs associated with the Mareva Order are not also being deferred.
[48] In accordance with r. 24(10)(a) of the Family Law Rules, the court shall, and I will, determine who, if anyone of the parties, is entitled to costs of the original ex parte Injunction Order and the come back hearing (and the steps for which costs are recoverable in between) and fix the amount of any such costs.
Costs As Between the Husband and Wife
The Come Back Motion
[49] On a comparative and contextual analysis, the wife was successful as against the husband. She succeeded in having the FLA Preservation Order continued as against him. The Mareva Order was focused on the Aarabi Family and Affiliates, not the husband. The fact that the wife did not succeed in having the Mareva Order continued is not “divided” success, comparatively, as between the husband and wife. While the court can consider overall success on a global basis (see E.L., at para. 14; Beckett, at para. 22; Boland, at para. 2), that consideration arises when looking at the comparative global success, issue by issue, as between the same parties. The “global” success that the husband seeks to take advantage of is not his own, but rather the success of the other Aarabi Family and Affiliates.
[50] The wife succeeded as against the husband in relation to the FLA Preservation Order and I find that she is entitled to an award of some costs.
[51] After taking a 40% discount against certain steps in the proceeding (disclosure and questioning) that the applicant concedes will be useful towards the eventual trial effort, the applicant asks that the court award her 50% of her substantial indemnity fees to be paid by the husband to partially indemnify her costs relative to the FLA Preservation Order. She claims the all-inclusive amount of $262,467.35 for these costs.
[52] The only suggestion that any of the amounts reflected in the applicant’s bill of costs are unreasonable are in relation to costs she included for a few case conference attendances that took place in between the ex parte Injunction Order and the come back motion, which the husband says ought not to be included. The costs of these conferences are not broken out in the bill of costs from the costs of the ex parte attendance and other procedural steps. The total amount claimed over the relevant time frame is $127,499.60, most of which would reasonably have been associated with the ex parte Injunction Order and efforts to maintain it. Furthermore, it appears from their bills of costs filed that at least some of the other respondents have claimed for the case conferences as well. It is a matter of discretion whether to allow parties to claim for case conferences and other attendances for which no express costs order, or direction that costs be reserved, was made.
[53] In the circumstances of this case, and based on my review of the endorsements from these case conference attendances, they dealt with matters related to the procedure and conduct of the come back hearing and matters ancillary thereto and I find them to be appropriately included in the costs related to this motion. These attendances were all on a continuum as the parties worked their way through the various procedural steps to get to the come back hearing. The situation here is different than in the cases that the husband relies upon in which a court (often after a trial) is being asked to look back over interlocutory steps in a proceeding and make costs awards in respect of those steps that were not expressly reserved to a later time: see Saunders v. Vargas, 2018 ONSC 4531, at para. 23; Cameron v. Cameron, 2018 ONSC 6823, paras. 83–88.
[54] The wife is not seeking to invoke the effects of r. 18(14) of the Family Law Rules to recover her full indemnity costs from and after the date of either of the offers she made. Accordingly, I do not need to determine whether she “beat” an offer she made that remained open for acceptance at the commencement of the hearing of the come back motion. However, her settlement offers remain a relevant consideration with regard to the reasonableness of both parties’ conduct vis-à-vis the freezing and preservation of the husband’s assets.
[55] The husband and wife both accuse each other of having acted unreasonably and/or in bad faith with respect to matters of disclosure in the context of this proceeding. I have not made any findings that either of them have done so or that either of them are deserving of an adverse costs award on account of bad behaviour.
[56] Both parties also say they made settlement offers that reflect upon the reasonableness of their conduct in the litigation that should be taken into account at this stage of determining the wife’s entitlement to and quantum of any costs award. The offers are complicated because of the interrelated claims, but in looking at all of the settlement offers exchanged, I find that the wife did communicate that she was prepared to accept an offer from the husband, if he had made one, to continue the FLA Preservation Order unencumbered by what the other respondents, Aarabi Family and Affiliates, might have been willing to do vis-à-vis their own assets under the Mareva Order. The wife was reasonable in maintaining the position that the FLA Preservation Order be continued until trial, regardless of what might transpire with the continuation of the Mareva Order against the other respondents, Aarabi Family and Affiliates.
[57] The wife made a severable offer to that effect on December 11, 2020, which the husband did not accept. Her offers made after that also kept that severable option open for the husband to accept. If he was prepared to abide that outcome as he now tries to suggest to support his assertion that he was acting reasonably by himself proposing the continuation of the FLA Preservation Order (which proposal is not clear from the settlement offers made on his behalf), he could have and should have accepted the wife’s severable offer and put that issue to rest. From that I can, and do, infer that the husband did not, propose that outcome (namely, the continuation of the Preservation Order in relation to his assets). Nor does his agreement to the earlier Consent Preservation Order cast a more favourable light on the husband’s resistance to the continuation of the subsequent FLA Preservation Order against his assets.
[58] Furthermore, as far as I can tell, the husband’s settlement offers were not severable so this is not a simple matter of him having missed the benchmark settlement value by a nominal amount attributed to a few bank accounts that he did not include in the respondents’ settlement offer, but that were included in the continuation of the FLA Preservation Order.
[59] Having regard to the nature and complexity of the issues, the conduct of the parties including their settlement positions and proposals, the lengthy period over which these issues were litigated (which I have already determined was no more the fault of the wife than the other parties), the husband’s own costs claimed for this motion, and considering the overall amount of costs claimed by the wife, I find the all-inclusive costs of $262,733 that the wife is seeking from the husband in respect of the continuation of the FLA Preservation Order to be fair, reasonable, and proportionate.
[60] I am fixing the wife’s costs of the FLA Preservation Order in that amount and ordering the husband to pay her those costs forthwith. No costs are awarded in favour of the husband in respect of either the FLA Preservation Order or the Mareva Order. Leave is granted to the husband to access the frozen funds held in trust for him by his mother to satisfy any costs awards made against him.
Undertakings, Refusals and Other Interim Motions
[61] Both the husband and wife eventually provided responses to the undertakings they gave during questioning, even if the answers were less fulsome than the other would have liked. While the responses could have been more timely, the nature of this litigation and the animosity between the parties has made even simple steps more complicated and time consuming than need be. That is unfortunate, but they have both been guilty of this at some point. Both parties ended up bringing motions on the other’s undertakings and both eventually provided responses to their undertakings. There were various procedural issues associated with these motions. The costs for that aspect of the motions would be nominal at best, they are difficult to carve out and ascertain, and they are a function of these parties’ inability to agree on even the simplest of matters. I have determined that the parties should each bear their own costs of any steps taken in relation to outstanding undertakings.
[62] The wife did not succeed on all of the refusals that she moved on, but she did succeed on some. The husband says he was “more successful” than the wife on the refusals motion because he prevailed on the issue that was most important to him, namely the waiver of privilege issue. I do not agree that the husband was “more successful” on this motion. This is a classic situation of divided success. The privilege issues raised were important to the husband and his mother, but the other information sought, some of which was ordered answered, was important to the wife’s theory as to how far back the alleged conspiracy and fraudulent conveyances may have gone. The court’s ruling on this motion identified important dividing lines on the privilege assertions, which required some disclosures on a topic about which even an absence of communications might ultimately be determined to be relevant. In the exercise of my discretion, I have determined that each party should bear their own costs of the wife’s refusals motion as well.
[63] I do not have sufficient information to determine whether either party is entitled to costs of the prior attendance before Nakonechny J. that the husband is seeking his costs of. I am not determining or fixing any costs of that prior attendance. They are part of the continuum of costs in connection with the ex parte Injunction Order and are deemed to be covered by the costs awards herein.
Are the Aarabi Family and Affiliates Entitled to their Costs, and if so, in What Amounts?
[64] The Aarabi Family and Affiliates were successful in their opposition to the continuation of the Mareva Order. They are entitled to some costs.
[65] Although the wife did incrementally agree to limit the scope of the initial Mareva Order as time went on, I found that the original ex parte Injunction Order was overly broad in its scope in relation to the assets of the Aarabi Family and Affiliates. The wife made some incremental adjustments to the scope of assets covered by the Mareva Order (through agreements to release certain assets over time) but did not make any settlement proposal that substantially scaled back the Mareva Order, nor did she accept the respondents’ collective June 15, 2021 settlement proposal, which would have, on a global basis, afforded her better protection and a broader scope of frozen assets than she achieved on the come back motion.
[66] Once the value of the assets associated with the husband (including the acknowledged trust monies held for him by his mother) are removed from the respondents’ collective June 15, 2021 offer, the value of assets that the other respondents were offering to keep frozen was still close to $10 million, and they achieved a better outcome than that on the motion (none of their assets remain frozen). Overall, the applicant would clearly have been better off accepting this June 15, 2021 global settlement proposal from the respondents (even if it was not severable) than the ultimate result she achieved on the come back motion. The Aarabi Family and Affiliates’ cost submissions account for the cost consequences of having “beat” their offer under r. 18(14) of the Family Law Rules.
[67] The aggregate amount of costs claimed by the respondents, $778,747, reflects the work of four sets of responding counsel. The respondents were not all in the same position and it would or should have been expected that they would retain independent sets of counsel to advance their different interests. The specific amounts that the court has determined to be reasonable to award to each respondent are addressed in more detail below, with the result that the overall amount of costs awarded to the Aarabi Family and Affiliates is reduced to just over $510,000 in the aggregate.
[68] These amounts of costs awarded in favour of each of the Aarabi Family and Affiliates are significant but not unreasonable or disproportionate, when considered in light of the nature of the issues on the come back motion, the length of time and number of steps that were involved in getting to the hearing of the motion, and having regard to the applicant’s own bill of costs, which indicates that she alone incurred over $650,000 in legal costs in connection with the come back motion, including both the continuation of the FLA Preservation Order (for which she has claimed $262,000 in costs, on a less than full indemnity scale) and the Mareva Order (which makes up for the balance of her costs incurred, of approximately $388,000). Objectively, the applicant would, or should, have reasonably expected that she would be facing a claim for costs, and costs award, of more than this if she did not succeed on the come back motion, given the number of parties and counsel involved.
[69] This is high stakes litigation. A Mareva Order, in particular, is a very extraordinary remedy with stringent requirements and a heavy onus. Family law litigants need to be mindful of their mounting litigation costs and adjust their litigation behaviour accordingly, or be prepared to be held accountable for the pursuit of unsuccessful positions: see Mooney, at paras. 30–34; Jackson, at para. 64.
[70] While I found that it was not unreasonable for the wife to seek the ex parte Injunction Order upon her initial discovery of the husband’s distribution of his wealth to the Aarabi Family and Affiliates, and at some level it is he who is to blame for involving them, that does not relieve her of the responsibility for the costs of her opponents in her hard fought effort, over more than a year of litigation, to continue that order once it was determined that the assets at issue had not been removed from this court’s jurisdiction. The consequences of this pursuit are exacerbated in the face of settlement offers that meet the requirements, and therefore trigger the cost consequences, of r. 18(14) of the Family Law Rules. Initial concerns aside, the applicant was not able to meet her onus of establishing that there was a risk of the other respondents dissipating assets and taking them out of the reach of the court, which was an essential requirement for the continuation of the Mareva Order.
[71] None of these costs awards in favour of the Aarabi Family and Affiliates are made on the basis of the applicant’s conduct having been unreasonable or her having acted in bad faith. The incidents of bad faith asserted by the respondents are the same as those raised on the come back motion, which I found were not established. Furthermore, although the applicant did not accept what turned out to be a favourable settlement proposal from the respondents, that is not a reason to separately “punish” her for not making/accepting more reasonable settlement proposals where, as here, she is already bearing the consequences of that through the mechanisms of r. 18(14) that have been built into the amount of costs that each respondent has claimed (full indemnity costs from and after the dates of the offers that they “beat”).
[72] The Aarabi Family and Affiliates are entitled to their costs associated with the dissolution of the Mareva Order on the come back motion as follows:
a. The husband’s sister and her husband Michael Kerley are awarded their all-inclusive costs of $146,902, comprised of partial indemnity costs of $10,393.11 up to the date of the respondents’ collective settlement offer made on June 15, 2021 (offering that the respondents would collectively freeze assets valued at $22 million, which they say they beat in the eventual outcome) and $136,507.72 in full indemnity costs thereafter. b. The husband’s father is awarded his substantial indemnity costs up to the respondent’s collective June 15, 2021 offer (I do not accept that he was necessarily in a position to offer to freeze the $15+ million in funds gifted to him by his son when he did so on September 21, 2020 having regard to the late-disclosed Deed of Gift of those funds to Pegah and unsatisfactory explanations about that) and his full indemnity costs thereafter, for a combined total of $114,236.09. c. The husband’s mother (and certain Aarabi Family and Affiliates associated with her) incurred, and seek significant costs of $398,446.58, comprised of partial indemnity costs up to December 14, 2020 (when she offered to preserve assets valued at $6,393,811 that she acknowledged she was holding in trust for the husband) and full indemnity costs thereafter. While she had the most at stake, the costs she seeks are disproportionately higher than the costs of the other respondents. The quantum of costs is in the discretion of the court and I consider an award of costs to the husband’s mother for the come back motion in the all-inclusive amount of $250,000 to be fair, reasonable, and proportionate in the circumstances.
Should the Costs be Reduced Having Regard to Trial Efficiencies?
[73] I have considered whether to further reduce the costs awarded in favour of the applicant and the Aarabi Family and Affiliates to account for time and effort that might be utilized for purposes of the trial. A significant amount of the submissions on the come back motion, both oral and written, were devoted to the merits of the claims, which will, by necessity, be addressed at trial. Certain parties took this into account but on a relatively small scale and only in relation to the disclosure and questioning. I would have thought a significant amount of the evidence and law on the merits of the claims would also be useful for trial purposes.
[74] However, no party sought this reduction or made submissions on what an appropriate further discount for this might be and I have thus decided not to make any further across the board reduction in the costs awards to account for trial efficiencies. Hopefully, those will translate into future cost savings for all parties.
Should there be Deferred Payment Terms for the Applicant?
[75] I am mindful that costs awards in family law should not “become an impediment to the pursuit of justice” and should not become an undue deterrent to potential litigants pursuing legitimate claims for fear of overly burdensome cost consequences: see Thompson, at para 9. The wife has raised a legitimate concern about her ability to pay the costs awards at this time.
[76] The costs payable to the wife are not a source of funds to pay the costs awards made in favour of the Aarabi Family and Affiliates. Those costs payable to her by the husband will be needed to defray her past legal bills, which are far in excess of this amount. Even though the wife has received some uncharacterized payments, over and above support, from the husband throughout the course of this litigation, my understanding is that those amounts were typically associated with ongoing litigation and other expenses. The wife’s financial statements do not indicate a significant source of liquid assets from which she could fund the costs that she is now being ordered to pay the Aarabi Family and Affiliates.
[77] The respondents acknowledge that the applicant’s ability to pay these costs could be a relevant consideration to both entitlement and quantum. The respondents suggest that she will eventually have the means to pay them, once she receives her equalization payment from her husband, even if she does not have that ability now. However, the husband has not conceded that he will owe an equalization payment.
[78] Having regard to the foregoing, costs payable by the wife to the respondents shall be payable as follows:
a. If the husband is willing to consent, the costs may be paid, as an advance on equalization, payable from the money held in trust by his mother. The FLA Preservation Order may be lifted for the sole purpose of paying the costs from those funds; or b. If the husband is not willing to consent to the advance on equalization, then the costs owing to the Aarabi Family and Affiliates shall be payable at the earlier of: i. A final decision/agreement has been rendered/reached regarding any equalization payment owing by the husband to the wife, at which time any equalization payment owing to the wife will first be used to pay her costs; or ii. A sale of the jointly owned matrimonial home, at which time the costs shall be paid from the wife’s share of the net proceeds of sale of the matrimonial home, before any money is released to her. To be clear, this cost order shall not be grounds for any of the respondents to force the partition and sale of the matrimonial home.
Summary of Costs Awards
[79] The following costs awards are made:
a. The husband shall forthwith pay to the wife her all-inclusive costs in respect of the FLA Preservation Order fixed in the amount of $262,733; b. No costs are awarded in favour of the husband in respect of either the FLA Preservation Order or the Mareva Order or in respect of any intervening motions between the granting of the ex parte Injunction Order and the come back motion; c. Leave is granted to the husband to access the $6,393,811 in frozen funds held in trust for him by his mother to satisfy any costs awards made against him and the FLA Preservation Order may be lifted for that purpose; d. The wife shall pay to the husband’s sister and her husband Michael Kerley their all-inclusive costs in respect of the Mareva Order fixed in the amount of $146,902; e. The wife shall pay to the husband’s father his all-inclusive costs in respect of the Mareva Order fixed in the amount of $114,236.09; f. The wife shall pay to the husband’s mother (and certain Aarabi Family and Affiliates associated with her) her all-inclusive costs in respect of the Mareva Order fixed in the amount of $250,000; g. Leave is granted to the husband to access the $6,393,811 the trust monies held by his mother to make a partial equalization payment to the wife in an amount sufficient to satisfy any of the costs awards made herein against the wife in favour of the Aarabi Family and Affiliates (subparagraphs d, e and f above) if he agrees to make an advance on the equalization payment (and the FLA Preservation Order may be lifted for that purpose), failing which the wife’s obligation to pay costs to the Aarabi Family and Affiliates shall be stayed and payable in accordance with paragraph 77(b), above.
[80] This endorsement shall have immediate effect as an order of this court.
KIMMEL J. Date: January 11, 2022
