COURT FILE NO.: FS-15-00020137-0000
DATE: 20220119
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Phivos Kyriacou
Applicant
– and –
Maria Zikos
Respondent
Nicholas Kapelos and Rajesan Rajendran, for the Applicant
Toni Wharton and Jacob Stall, for the Respondent
HEARD: June 7, 8, 9, 10, 11, 14, 15, and 16, 2021 and July 20, 2021, supplemented by written submissions dated June 25, July 9, July 16, 2021, and October 8, 2021 (Supplementary written costs submissions dated December 9, 16 and 22, 2021)
TRIAL COSTS ENDORSEMENT
Kimmel J.
[1] This eight-day trial was conducted over Zoom. Eight witnesses testified. The court received both written and oral closing submissions. The applicant’s claims were dismissed in Reasons for Judgment dated November 19, 2021 (Kyriacou v. Zikos, 2021 ONSC 7589).
[2] After the trial decision was released the parties were given the opportunity to try to resolve the issue of costs, failing which they were permitted to make written costs submissions. They made written costs submissions as follows:
a. The respondent delivered a costs submission dated December 9, 2021 in which she requests costs on a substantial indemnity scale up to the date of her September 4, 2018 offer to settle (by which she offered to pay $3,000.00 for a dismissal of the applicant’s claims), and full indemnity costs thereafter, in the all-inclusive amount of $125,284.56;
b. The applicant delivered a costs submission dated December 16, 2021 in which he suggests that he was more settlement oriented (having made more settlement offers, in contrast with the applicant’s two offers made approximately 2.5 years apart for amounts that were not materially different when litigation costs are accounted for). He also points to the credibility concerns that the court had with both parties and the respondent’s late identification of documents that were ultimately used to impugn the applicant’s credibility at trial. He asks the court to make no award of costs to either party; and
c. The respondent delivered a reply costs submission dated December 22, 2021 in which she distinguishes the cases that the applicant relies upon to suggest that her conduct of, and during, the litigation was unreasonable or that she acted in bad faith. The respondent further points to a lack of authority to support the applicant’s assertions that there should be a finding of bad faith against her in circumstances where both parties suffered from credibility lapses and/or because her settlement position did not materially change over the course of the proceeding.
[3] The principles applicable to the determination of costs in this case are not complex or controversial. They can be found in Rules 18 and 24 of the Family Law Rules, O. Reg. 114/99, and cases decided thereunder. The ultimate discretion of the court to determine the costs of a proceeding comes from s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[4] The issues that must be decided are whether the respondent is entitled to costs, and if so, on what scale and in what amount.
Is the Respondent Entitled to Costs?
[5] Under r. 24 of the Family Law Rules there is a presumption that a successful party is entitled to costs.
[6] The court’s initial assessment of success should be made based on the pleadings and specific relief claimed at trial, if it is different: Johnstone v. Locke, 2012 ONSC 1717, at para. 12. “Success” is assessed by comparing the terms of an order against the relief originally requested in the pleadings and against the terms of any offers to settle: Johanns v. Fulford, 2010 ONCJ 756, at para. 13. The respondent is clearly the successful party in this case, having achieved the dismissal of all of the applicant’s claims against her at trial, in their entirety, which was the relief that she consistently sought throughout this action.
[7] A successful party can be deprived of all or part of their own costs under r. 24(4) if they behaved unreasonably. Rule 24(5) of the Family Law Rules directs the court, in deciding whether a party has behaved reasonably or unreasonably, to 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.
[8] It was noted in the trial decision that there were credibility concerns on both sides and that these concerns would be among the factors considered if the court was asked to decide the issue of costs (e.g., if the parties did not reach an agreement on costs and made their written cost submissions, which they have now done). However, no authority has been presented for the suggestion now made by the applicant that because both parties were found by the trial court to have suffered from credibility concerns there should be no award of costs (or put another way, that this would be a justification for depriving the successful respondent of any entitlement to costs).
[9] I agree with the respondent that the cases that the applicant cites as examples of a successful party being deprived of their costs are all distinguishable on their facts, for the reasons that the respondent has outlined in her reply costs submissions, namely that:
a. In C.L.H. v. R.J.J.S., the court found both parties had inflammatory pleadings. The mother made allegations of sexual abuse and physical abuse, which led to alienation of the child from his father. Further, the mother’s allegations were of grave moral turpitude, were maintained for two years until abandoned at the outset of trial, and were related to the most contentious issues, thereby increasing legal costs: 2012 BCSC 1196, at paras. 12, 15 – 17.
b. In Mulloy v. Mulloy, neither party made an offer to settle, both had disclosure issues, and the applicant who was seeking costs made improper references to what was said at the settlement conference and took steps that wasted time and money: 2019 ONSC 38, at paras. 10 – 11.
c. In Oremush v. Hickey, the mother was successful at trial but had wrongfully denied parenting time, failed to abide by disclosure orders, made false allegations to justify her breaches of court orders, lied under oath, fabricated evidence, and destroyed evidence while under a court order to refrain from doing so: 2021 ONSC 7711, at para. 10.
[10] The respondent’s credibility issues, as noted in the trial reasons for judgment, are relevant and will be considered in the context of the court’s determination of the scale and quantum of costs that the respondent will be awarded. However, her conduct giving rise to the credibility concerns noted by the court at trial does not rise to a level that should entirely disentitle her to any costs.
[11] Nor are there other grounds for finding that the respondent behaved unreasonably in her settlement positions or in the conduct of the litigation so as to disentitle her to costs under r. 24(4) and (5).
[12] The applicant’s settlement positions were not unreasonable. A party who believes that they have no liability is not acting unreasonably by maintaining that position and offering only modest settlement positions, as the respondent did in this case, by her offers:
a. Dated September 4, 2018, to pay the applicant $3,000 for the dismissal of his claims without costs if the offer was accepted within a specified time after it was made; and
b. Dated May 4, 2021, to pay the applicant $20,000 for the dismissal of his claims without costs if the offer was accepted within a specified time after it was made.
[13] In contrast, while the applicant’s offers were more numerous, they all required the respondent to pay him substantial sums of money:
a. The first one dated September 7, 2018 requiring her to pay him $500,000;
b. His offer dated February 3, 2021 made at the trial management conference required her to pay him $150,000;
c. His next offer dated May 14, 2021 required her to pay him $200,000; and
d. His final offer dated June 2, 2021 required her to pay him $75,000 (which he later withdrew on June 25, 2021).
[14] The applicant further suggests that there was something untoward about the timing of the respondent’s identification of new documents (specifically, prior sworn statements of the applicant in earlier family law proceedings involving his children and his previously filed tax returns) that the respondent indicated in early May of 2021, after engaging new counsel, would be relied upon at trial. Counsel for the applicant emphasizes in his cost submission that he did not have the opportunity to review these “Specific Productions” until after the exit trial management conference held on May 18, 2021, but counsel acknowledges that these documents negatively impacted his assessment of the applicant’s claims, leading him to later recommend that the applicant make a substantially reduced offer of $75,000 on June 2, 2021 (albeit later withdrawn).[^1]
[15] These “Specific Productions” that the respondent identified in advance of the trial were documents that the applicant had himself signed and relied upon for purposes outside of this litigation. Regardless of when and how the respondent obtained them, they were clearly within the applicant’s possession, control, or power (they were his own affidavits and income tax filings). There is nothing untoward about the respondent finding them and providing advance notice to the applicant of her intention to rely upon them at trial. They turned out to be documents that significantly undermined the applicant’s credibility at trial.
[16] It is the applicant who did not produce these “Specific Productions” or share them with his counsel. If either party’s conduct were to be impugned as a result of the timing of these productions, it should be the applicant’s not the respondent’s. This will be revisited in the next section when I consider the applicant’s behaviour and its relevance to the appropriate scale of costs.
[17] I find that the respondent, who was the successful party at trial, did not behave unreasonably and is entitled to an award of some of her costs of this action.
What is the Appropriate Scale of Costs?
[18] Two issues have been identified for the court’s consideration that are of particular relevance in the determination of the appropriate scale of costs: the respondent’s settlement offers and the conduct that gave rise to the credibility concerns detailed in the trial decision.
The Respondent’s Settlement Offers
[19] Rule 18(14) of the Family Law Rules provides that a party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:
If the offer relates to a motion, it is made at least one day before the motion date.
If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
[20] The respondent made two settlement offers, both of which met the requirements of this rule, one on September 4, 2018 and one on May 4, 2021. She achieved a more favourable outcome at trial than either of these offers. It is on this basis that she asks the court for her substantial indemnity costs up to September 4, 2018 and her full indemnity costs thereafter, in the all-inclusive amount of $125,284.56.
The Parties’ Conduct (Credibility Concerns)
[21] In the reasons for judgment at trial, the court noted that while the respondent is the successful party (the action having been dismissed), the issues were difficult to decide and were made more difficult by the credibility concerns on both sides. The parties were put on notice that this would be among the factors that the court would consider if they did not reach an agreement on costs and the court was asked to decide them.
[22] Both parties devote significant space in their cost submissions to pointing out the court’s negative credibility findings against the other. The court most certainly did make a series of negative credibility findings against both the applicant and the respondent.
[23] Some of the findings at trial regarding the credibility of the parties are summarized as follows at paras. 21 – 24 of the decision:
a. Both parties have serious credibility issues in this case, as they have pointed out in each other’s testimony, with examples noted above of inconsistencies in their own testimony at trial and testimony they gave prior to trial in this and other proceedings, and between their testimony and that of other witnesses.
b. Further, they both admitted to having misrepresented their employment status and financial resources on their application for their mortgage for 39 Chipper. Phivos [applicant] would not admit that this was a lie and insisted it was just a means of getting a mortgage. That may be, but from where I sit, it was a misleading or fraudulent means of getting a mortgage which both Phivos and Maria [respondent] appear to have had no qualms about at the time, and expressed no real regrets about at the trial.
c. There are unexplained gaps and inconsistencies in both of their income tax filings (which they both claim to be ignorant of and blame on the bookkeeper who they used). It is clear from the record that both parties have significant credibility issues and a demonstrated propensity for lying or distorting the truth or having convenient memory lapses when it suits their purposes.
d. Very little of what the parties testified about was “black or white”. Much was “grey” (ambiguous or contradicted, sometimes with an attempted explanation for the discrepancy, but often not) … I will not go so far as to say that I do not believe anything that either Phivos or Maria said in their testimony. However, in light of all of the identified difficulties with their testimony, I am not prepared to accept what either of them have said without some independent corroboration where it is contentious and/or has an air of implausibility.
[24] Specific further findings were made regarding each of their testimony on particular topics. These will not be rehashed, but some of the significant negative findings include:
a. The court’s rejection of the respondent’s assertion that the parties ceased to be in any sort of romantic relationship or co-habiting in a “spouse-like” relationship during the 10.5 years that they continued to live together between January 2002 and August 2013: see paras. 43 – 44.
b. The applicant (by his own admission) committed a fraud so that he could continue to receive social assistance, by claiming he was not working for medical reasons (when he was working for the respondent) and by not disclosing that he held any ownership interest in 39 Chipper. He also sought the declaration of an equitable trust that was (by his own admission) created for the unlawful purpose of avoiding his creditors, in particular his children’s claims against him in the family law proceeding: see paras. 70 – 71.
[25] The applicant suggests that the conduct of the respondent underlying these credibility concerns is a ground for reducing her costs (whether it be the scale and/or quantum awarded), under r. 24(4) and (5). The arguments are the same as those detailed in the preceding section dealing with the respondent’s entitlement to costs. There is a tension here between the “entitlement” to costs arising under r. 18(14) that flows from the respondent’s two settlement offers that she beat at trial and the fact that some of her conduct made the trial more prolonged due to her lack of credibility.
[26] The respondent suggests that the scale tips back in her favour because of the equal or greater concerns identified at the trial about the applicant’s credibility and his bad behaviour prior to, during, and after the trial, including his evolving claims that he continued to modify even in his closing submissions, and his refusal to resolve the issue of costs on any basis other than each party bearing their own.
[27] Rule 24(8) of the Family Law Rules expressly provides for a full recovery of costs when another party acts in bad faith. The applicant relies upon this rule, in addition to r. 18(14), in support of her request for full indemnity costs.
[28] The respondent points to the applicant’s failure to produce pertinent documents (namely, the Specific Productions later produced by the respondent and found to be very damning to the applicant’s credibility at trial) and contends that significant non-disclosure and “a catch-me-if-you-can approach,” such as the applicant engaged in, equates to bad faith on his part: Trudel v. Trudel, 2010 ONSC 5177, at paras. 10, 17 – 18.
[29] The respondent further contends that the conduct that led to the credibility findings against the applicant (including his social assistance fraud, lies to the mortgage company, and his sworn affidavits in the family law proceeding that were not disclosed and that he then attempted to distance himself from by claiming that they were untruthful, as were his tax returns) was intended to deceive or mislead the court and supports a finding of bad faith: Leonardo v. Meloche, 2003 CanLII 74500 (Ont. S.C.), at para 7. The respondent argues that the sheer magnitude of the applicant’s dishonesty should give rise to a finding of bad faith or unreasonableness, and that it needlessly complicated and protracted these proceedings, resulting in increased legal costs.
[30] The court recognizes that there are instances in which the conduct of a party may be found to be deserving of the court’s sanction by an order to pay full indemnity costs, as provided for under r. 24(8): “If a party has acted in bad faith, the court shall decide costs on a fully recovery basis and shall order the party to pay them immediately”; Beaver v. Hill, 2018 ONCA 840, 143 O.R. (3d) 519, at para. 13.
[31] But this is not a binary or absolute consideration. The Court of Appeal for Ontario in Beaver, at paras. 9 – 13 lays out a comprehensive set of principles to be applied with respect to costs in family law matters, emphasizing that there are no hard and fast rules and that costs very much remain in the discretion of the court. The relevant principles are as follows:
a. In family law matters, judges are not constrained to the normal scales of costs found in the Rules of Civil Procedure;
b. 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;
c. There is no provision in the Family Law Rules that provides for a general approach of “close to full recovery” costs;
d. Rule 24(12) sets out the appropriate considerations in fixing the quantum of costs in a family law matter; and
e. Proportionality and reasonableness are the touchtone considerations to be applied in fixing the amount of costs.
[32] Some of these factors may also be considered in the determination of the quantum of costs, but what is clear is that the costs, including the scale of costs, are entirely within the discretion of the court and full indemnity costs are not the norm.
[33] Modern family law cost rules are based on four broad objectives: (1) to partially indemnify successful litigants; (2) to encourage settlement; (3) to discourage improper behaviour by litigants; and (4) to ensure cases are dealt with justly under r. 2(2) of the Family Law Rules: Mattina v. Mattina, 2018 ONCA 867, at para. 10.
[34] Unlike the court in the case of Deelstra v. Van Osch, 2003 CanLII 2007 (Ont. S.C.), at para. 4, relied upon by the respondent,[^2] I do consider the concerns about the credibility of the respondent that were identified at trial to be a reason to reduce her costs from what she might have otherwise been entitled to under Rule 18(14) of the Family Law Rules. Although the respondent made a compliant offer under r. 18(14) and settlements such as she proposed are encouraged by the court, she was not as forthcoming at trial as she could or should have been and she engaged in some questionable conduct (as summarized above and detailed in the reasons for judgment at trial).
[35] While it is also the case that the applicant behaved unreasonably, and perhaps even acted in bad faith within the meaning of r. 24(4) and (5), neither side was as forthcoming as they should or could have been and neither party’s conduct should be condoned. Ultimately, what the court is concerned with now is what level of “indemnity” the respondent should receive as the successful litigant who beat her offers, having regard to the attenuating circumstances, including the behaviour of both parties.
[36] In the exercise of my discretion, I have decided not to award the respondent her full indemnity costs from and after the date of her settlement offer; rather, I am “ordering otherwise” under r. 18(14). The appropriate balance of the costs objectives that I consider to be fair and reasonable in this case is best achieved by an award of partial indemnity costs to the respondent up to the date of her first settlement offer on September 4, 2018 and substantial indemnity costs to the respondent from and after the date of her first settlement offer.
What is the Appropriate Quantum of Costs?
[37] 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 r. 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.
[38] These factors are not exclusive to the quantum of costs and many have already been considered in the determination of the scale of costs.
[39] The total number of lawyer hours and the hourly rates charged are similar in both the applicant’s and respondent’s bills of costs (the respondent’s total lawyer hours and fees are lower). The total fees and disbursements claimed by the applicant are in line with what the respondent claimed (in fact, the amounts claimed by the respondent are consistently lower). This comparison is a barometer of the reasonableness and proportionality of the fees and disbursements outlined in the respondent’s bill of costs. Further, the number of lawyers and lawyer hours, having regard to their experience, is objectively reasonable over the course of six years of litigation and an eight day trial with as many witnesses.
[40] The fact that the respondent changed counsel several times could theoretically have added some time or delay to the conduct of the proceeding, but that has not been demonstrated by the applicant. Conversely, the respondent points to the multiple pleading amendments that the applicant engaged in and his evolving theories of liability and damages, including right up to and during his closing submissions at trial, as delays and added expense that could be attributed to his conduct.
[41] It is not the job of the court to scrutinize every line item in a certified bill of costs submitted on behalf of a party at the end of a case. No particular items in the respondent’s bill of costs have been identified for heightened scrutiny by the applicant. The court has not been presented with any reason to question the fees and disbursements claimed by the respondent.
[42] The full indemnity fees of the respondent indicated in her bill of costs are $111,012.50 plus HST. She says in her written submissions that she incurred legal fees of $5,047.50 prior to her September 4, 2018 settlement offer and legal fees of $105,965 thereafter. She seeks 75% of her pre-offer legal costs and 100% of her post-offer legal costs.
[43] This court is awarding her partial indemnity (calculated at 66%) for her pre-offer legal costs, which amount to $3,331.35 plus HST and substantial indemnity (calculated at 80%) for her post-offer legal costs, which amount to $84,772 plus HST. Her claimed disbursements of $1,266.35 are awarded without reduction.
[44] These costs are payable by the applicant to the respondent within 30 days of this endorsement. This endorsement and the costs award contained herein has immediate effect as a court order without the necessity of formal entry.
Kimmel J.
Released: January 19, 2022
COURT FILE NO.: FS-15-00020137-0000
DATE: 20220119
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Phivos Kyriacou
Applicant
– and –
Maria Zikos
Respondent
TRIAL COSTS ENDORSEMENT
Kimmel J.
Released: January 19, 2022
[^1]: Although not directly relevant to this aspect of the costs analysis, the applicant tries to suggest that his conduct was reasonable based on the various settlement offers he made, even though none of them were more favourable than the outcome of the trial. The applicant argues that his settlement positions were reasonable because they were made on the advice of his counsel without the benefit of the Specific Productions from the applicant’s family law proceeding and his historic income tax filings, which turned out to be very damning for the applicant’s credibility. It hardly lies in the applicant’s mouth to suggest that his settlement positions were reasonable because he failed to disclose documents to his counsel that later negatively impacted his counsel’s assessment of the value of the applicant’s claims.
[^2]: In Deelstra, the court determined that one party was more credible than the other. Further, the issue about which the mother was not believed took very little court time and, although not proven, it was an allegation that the court found the mother herself believed. In those circumstances, the court found that the credibility concerns regarding the mother were not significant enough to warrant a reduction in the costs to which she would otherwise be entitled based on the offers she had made.