Court File and Parties
COURT FILE NO.: 9808/12
DATE: 2022-11-16
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Wei Xiu (Catherine) Cui, Applicant
AND:
Paul Liwanpo, Respondent
BEFORE: Heeney J.
COUNSEL: Mark Simpson, for the Plaintiffs
Norman Pizzale, for the Defendants
HEARD: December 13, 14, 15, 16 and 17, 2021 by videoconference; written argument completed March 1, 2022; judgment released August 8, 2022; written submissions on costs completed September 22, 2022
ENDORSEMENT
[1] In my Reasons for Judgment released August 8, 2022, at para. 238, I directed the applicant to serve and file brief written submissions on costs within 20 days, with the respondent’s response to follow within 15 days thereafter, and any reply to follow within 10 days thereafter. The applicant did not file any submissions on costs, choosing instead to serve a Notice of Appeal dated September 7, 2022. The respondent, however, did file his written submissions on costs on September 12, 2022. The applicant filed no reply to those submissions, and the time for so doing expired on September 22, 2022. I will, therefore, decide the issue of costs based solely on the submissions filed by the respondent.
[2] This was an extremely complicated proceeding involving a multitude of issues, which required reasons spanning 51 pages and 239 paragraphs to decide. The parties have been litigating this application since it was commenced by the applicant on November 14, 2012. I have already found as a fact that the delay in bringing this matter to a trial was almost entirely the responsibility of the applicant, for reasons explained in my decision of August 8, 2022.
[3] The respondent claims costs totalling $146,000, inclusive of disbursements and HST, on the basis that he has been the successful party in this litigation, and that he made offers to settle that would have been more favourable to the applicant, had she accepted them, than the result at trial.
[4] Rule 24 of the Family Law Rules deals with how the court is to exercise its discretion with respect to costs. The portions of that rule, relevant to the case at bar, are as follows:
- (1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.
(4) Despite subrule (1), a successful party who has behaved unreasonably during a case may be deprived of all or part of the party’s own costs or ordered to pay all or part of the unsuccessful party’s costs.
(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.
(6) If success in a step in a case is divided, the court may apportion costs as appropriate.
(8) If a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately.
(12) In setting the amount of costs, the court shall consider,
(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.
(12.1) Any claim for costs respecting fees or expenses shall be supported by documentation satisfactory to the court.
(12.2) A party who opposes a claim for costs respecting fees or expenses shall provide documentation showing the party’s own fees and expenses to the court and to the other party.
[5] Given the presumption in favour of the successful party set out in r. 24(1), it is important to determine which party was successful.
[6] A useful starting point is to consider the various claims that were at issue and the result of each one. Given the large number of issues in dispute in this case, I have prepared a table, which lists the disputed issues, and indicates, with an “X”, who the successful party was on that issue. The issues are in the same order as they are dealt with in my reasons:
Issue
Applicant
Respondent
Equalization issues:
1573 Hansuld St., London
X
1450 Villa Capri Circle, Odessa
X
Applicant’s date of marriage property
X
MD Management accounts
X
$80,000 add-back to Scotia Acct. 50529
X
Isle of Man accounts
X
Scotia McLeod account 400-74200
X
TD account 6005270
X
Sun Trust account
X
2315771 Ontario Ltd.
X
Promissory note owing by applicant to respondent
X
Respondent’s tax liability on business premises
X
$45,325 debt owed by applicant’s corporation
X
Respondent’s date-of-marriage goodwill
X
Alleged debt owing by first husband
X
Post V-day adjustments:
$40,000 withdrawal from Synovus account
X
Withdrawals April to August, 2012
X
Accounting for Florida rental income
X
Rent for Hamilton Road, London
X
Clinician fees
X
Support claims:
Child support
X
Compensatory spousal support
X
Needs-based spousal support
X
Retroactive adjustment of interim spousal support (both claims dismissed but respondent received reimbursement for support paid from March 1, 2020)
X
Other claims and miscellaneous issues:
Water damage claim
X
Damage to computer equipment
X
Punitive/exemplary damages
X
Outstanding costs orders
X
Mediation costs
X
Miscellaneous charges and withdrawals by applicant (mixed success but respondent ended up recovering $25,343)
X
Claim for reimbursement of salary of $43,000
X
[7] It is readily apparent from reviewing this list that, while success was divided to a limited extent, the respondent was the successful party on the great majority of the issues. Most importantly, many of the issues lost by the applicant had a high dollar figure attached to them. For example, her claim for Florida rentals amounted to US$205,927; the claim for rent for Hamilton Road was $901,176; the claim for clinicians fees was $945,101; child support was $150,000; and ongoing spousal support was $15,000 per month ($180,000 per year, indefinitely). The issues that the respondent lost were modest by comparison, with the exception of the claim that he was entitled to a date-of-marriage credit for goodwill in his medical practice of $500,000.
[8] Success, or the lack thereof, can also be reflected in how the final result at trial compared to offers to settle made by the parties. In addition, such a comparison is a reflection of how reasonable or unreasonable each party was in this litigation.
[9] The result at trial was that the applicant was awarded an equalization payment in the gross amount of $1,544,025, which was reduced by several credits, including water damage to the house, reimbursement of interim spousal support paid from March 1, 2020 forward, and other adjustments and credits. Those credits totalled $204,547, thereby reducing the applicant’s net entitlement to $1,313,342. The two jointly-owned Florida properties, 16617 Ivy Lake Drive, Odessa and 30806 Sonnet Glen, Wesley Chapel, were ordered to be sold and the proceeds paid to the applicant, with the respondent’s half-share thereof being applied toward the equalization payment due to the applicant. The balance was to be paid by the respondent within 30 days of the sale of the two properties.
[10] The respondent’s first offer was dated September 24, 2020. It offered both Florida properties to the applicant, plus $80,000 in cash, plus a tax-free RIF rollover to the applicant’s RRSP, in the amount of $500,000. Spousal support was to terminate on September 30, 2020. No child support was to be payable.
[11] According to the respondent’s submissions, assuming a 20% tax reduction in the value of the RIF, the cash value of this offer is $985,000. The respondent stated in his written submissions that this is approximately $328,000 less than the applicant recovered at trial. I disagree. It is approximately $328,000 less than the net equalization payment, but under the judgment the applicant is also entitled to receive 50% of the equity in the two Florida properties once they are sold, over and above her net payment. According to the offer, the stated consideration for a 50% interest in Ivy Lake was $320,000, and the stated consideration for a 50% interest in Sonnet Glen was $160,000. Since the transfer of those properties to her is included in the settlement figure of $985,000, the actual difference from the result at trial is $808,000.
[12] The next offer made by the respondent was dated November 26, 2021. It offered to settle the equalization issue only. I should point out at the outset that, although it purports to offer settlement of only the equalization issue, it also deals with sale and division, or transfer of, the jointly-owned Florida properties, which is a completely separate issue from equalization. The applicant’s offer to settle, discussed below, takes the same approach. For consistency, I will do the same in my analysis, so that dealing with the equalization issue will also include dealing with the two jointly-owned properties in Florida, but will not consider the other issues that led to the $204,547 reduction in the applicant’s net entitlement.
[13] To return to the respondent’s equalization offer of November 26, 2021, it offered to fix the equalization payment owing to the applicant at $1,561,411, which is about $17,000 more than the result at trial. In addition, the applicant had the option of either selling the Florida properties and receiving her 50% interest therein, or receiving a transfer of the respondent’s interest therein, for a credit equivalent to $360,000 for Ivy Lake and $200,000 for Sonnet Glen. The balance of the equalization payment owing to the applicant, after litigating the remaining issues, would be paid by bank draft or a tax-free rollover from his RIF at the applicant’s option.
[14] I am satisfied that this offer does, indeed, exceed the result at trial with respect to the equalization issues, by the amount of $17,000, since the judgment fixed the equalization payment at $1,544,025 and similarly provided that the applicant would receive her 50% interest in the Florida properties over and above that payment. Since it represented a settlement of the equalization issue only, almost all of the most contentious issues remained to be litigated. Those are summarized in the offer as follows:
Without restricting the generality of the preceding, the balance of the issues which are currently scheduled for the trial sittings of December 6, 2021 include the Applicant's claims for child and spousal support, the Respondent's claims to a credit for over payment of spousal support, damages to property and post separation adjustments including joint bank accounts, a promissory note, rental proceeds and costs ordered.
[15] However, the respondent made a further offer, also dated November 26, 2021, which proposed settlement of all issues. It offered the following:
The two Florida properties would be transferred to the applicant, at her option, with the respondent’s 50% interest having deemed values of $360,000 and $200,000 respectively. Those amounts would be applied to the net payment due from the respondent to the applicant;
Alternatively, the two properties would be sold and the net proceeds divided;
The applicant was then presented with two options. Option 1 was a tax-free rollover from the respondent’s RIF to her RRSP in the amount of $875,000 gross; option 2 was the payment of the cash sum of $580,000;
In addition, the respondent would pay the further sum of $70,000 to the applicant;
Spousal support was to terminate retroactive to December 2, 2021;
The promissory note owing to the respondent in the amount of $25,000 was deemed to be forgiven;
The outstanding costs orders against the applicant, totalling $15,000, were deemed to be forgiven;
There was no child support payable;
Each party would bear their own costs.
[16] The respondent, in his submissions, states that, assuming a 20% tax rate on the RIF rollover, this offer is equivalent to $1,377,916 to the applicant, which is approximately $63,000 more than the result at trial. Once again, I disagree, for the same reason outlined above regarding the September 24, 2020 offer. The judgment awarded $1,313,342 in a net payment to the applicant, and in addition she is entitled to receive her 50% interest in the Florida properties. Assuming that her share in those properties is worth a total of $560,000, her total recovery under the judgment would be $1,873,342.
[17] Under the offer, if the properties were sold and the net proceeds divided equally, she would receive $560,000 from that source. The respondent would then be obligated to pay either a total of $650,000 in cash; or, do a tax-free RIF rollover of $875,000 gross and pay the further sum of $70,000. Using the respondent’s assumption of a 20% tax rate on the rollover, the applicant would receive the equivalent of $700,000 from that source, plus a payment of $70,000, plus her interest in the Florida properties worth $560,000, for a total recovery of $1,330,000. Since she would have been entitled under the offer to keep all spousal support payments up to December 2, 2021 (whereas the judgment terminated support 22 months earlier), this benefits her to the tune of $47,916. This brings the total value of the offer to $1,377,916, which is $495,426 less than her recovery under the judgment.
[18] The parties participated in mediation for 3 ½ days in an effort to settle the case. According to the respondent’s submissions, the parties agreed upon an equalization payment of $1,561,422, and were “very close” to resolution of the other issues. However, on day #4, the applicant resiled from all of the efforts made over the preceding three days, and essentially went back to her original settlement position. Given that no agreement was formalized, and no formal offers to settle flowed from this mediation, I give it no weight.
[19] The applicant served one formal offer to settle, dated November 29, 2021, on the equalization issue only. The key terms proposed the following:
The respondent would pay an equalization payment of $1,350,000 by bank draft to the applicant;
The equalization payment may be adjusted upward or downward after determiniation of all other outstanding claims;
The respondent would pay the applicant $50,000 for her contributions to 16251 Ivy Lake Drive (which was solely owned by the respondent, and is not to be confused with the jointly-owned property at 16617 Ivy Lake);
The applicant would receive sole title to the jointly-owned property, 16617 Ivy Lake Drive;
The Sonnet Glen property would be listed and sold, and the net proceeds equally divided;
The applicant’s claims for an accounting of rents on the Florida properties would survive, and be addressed at trial;
The respondent would withdraw his claims for water damage to the matrimonial home.
[20] Subject to the fact that the most contentious issues remained on the table, including the claim for an accounting of Florida rents, this offer would provide the applicant with a cash payment of $1,400,000, plus sole title to 16617 Ivy Lake. Using the same equity figures above, where a 50% interest in that property is worth $360,000, this transfer has a value of $720,000. She would also receive her 50% interest in Sonnet glen, valued at $200,000, bringing her total benefit to $2,320,000.
[21] To compare that to the results at trial, it is, once again, important to use the gross equalization payment figure of $1,544,025, since this is an offer to settle the equalization issue only. Her total benefit under the judgment is the equalization payment, plus 50% of Ivy Lake at $360,000, plus 50% of Sonnet Glen at $200,000, for a total value of $2,104,025. Thus, her offer on equalization alone exceeds the amount awarded in the judgment award by $215,975.
[22] However, the offer also required the respondent to withdraw his claim for water damage to the matrimonial home. Even though this offer purported to be an offer to settle equalization only, leaving all other outstanding issues to be litigated, an exception was made for this one outstanding issue. The result at trial regarding this issue was judgment in favour of the respondent in the amount of $120,000. Requiring the respondent to forgive this claim amounts to a benefit to the applicant in that amount, such that her offer actually exceeds her entitlement in the judgment by a total of $335,975.
[23] In the result, the respondent beat his offer of November 26, 2021, on the equalization issue only, by $17,000. His two offers to settle all of the issues fell short of the result at trial by $808,000 and $495,426 respectively. The applicant’s one offer, on the equalization issue only, exceeded her entitlement after trial by $335,975. She failed to even make an offer to settle the remaining issues, which is, I find, unreasonable and unacceptable.
[24] Given that the respondent did beat his offer on the equalization issue, and given that he was the successful party on the great majority of the issues litigated, coupled with the fact that the issues the applicant lost had dollar figures attached to them that well exceeded $2 million in total, I conclude that the respondent is the successful party, and is presumptively entitled to his costs. However, I reject the submission of the respondent that he should be entitled to full recovery costs on the equalization issue because he beat his offer to settle that one issue. The other issues were enormously significant to both parties, and large sums of money were in dispute. It is clear that both parties had entirely unrealistic expectations with regard to those other issues, and the gulf between their positions was enormous, such that a trial was probably inevitable even if the applicant had accepted his offer on equalization. It is an impossible task to separate the time spent on the equalization issue from the time spent on the other issues, to facilitate application of a higher scale of costs to the former.
[25] Furthermore, I am not satisfied that much, if any, trial time would have been saved had the equalization issue been settled. The parties agreed to confine their trial to 5 days, which was all the time that was available, and which required them to operate with maximum efficiency. Had the equalization issue been settled, I have no doubt that they would have used the entire 5 days anyway, by spending more time on the many other issues they were fighting about.
[26] I also reject the respondent’s submission that the applicant should, pursuant to r. 24(8), pay full recovery costs because she acted “in bad faith” in walking away from the mediation, after having arrived at an apparent resolution of the equalization issue. As is evident from the analysis of the offers to settle, above, the equalization issue was not what this war between the parties was really all about. It was the other issues, already discussed, such as child and spousal support, the applicant’s various claims for rent, and the water damage claim, that really separated the parties. It was those other issues that took the respondent from a perfectly reasonable settlement position on equalization, which closely mirrored the result at trial, to a final position on settlement of all issues that was almost $500,000 off the mark.
[27] While walking away from a mediation, after progress has been made, is unreasonable behaviour, I am not persuaded that it amounts to bad faith sufficient to justify an award of full recovery costs.
[28] Having determined that the respondent is the successful party, and is entitled to an award of costs, I will now consider the various factors enumerated in r. 24(12) in fixing the amount of that award. This requires the court to consider 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:
[29] There is nothing in the record, and nothing that came to my attention during the course of the trial, that suggests any unreasonable behaviour on the part of the respondent. His conduct in the litigation was respectful to the court, and sought to move matters forward to a timely resolution or a trial. Those efforts were frustrated by the conduct of the applicant, who engaged in an ongoing campaign of delay that is outlined in my reasons for judgment, and need not be repeated.
[30] The applicant, as I have found, was argumentative and evasive in her testimony, and engaged in a pattern of obstruction that is evident from the discovery transcripts filed. She failed to produce relevant documents, and failed to comply with court orders when production was ordered. This is unreasonable behaviour in any litigation, but is particularly so in this case due to the multitude and complexity of the issues. Over 8,000 pages of documents were filed on Caselines in this trial, yet there were still many gaps remaining in the evidence due to the applicant’s lack of disclosure.
[31] The applicant attempted to use the criminal process to gain an advantage in these proceedings, as recently as three days before the trial was to commence. She was found to be an uncredible and unreliable witness, whose evidence was rejected whenever it conflicted with that of the respondent.
[32] The positions she took at trial on the various issues were also patently unreasonable, to the point of being absurd. Her claim for ongoing spousal support provides a good illustration. The marriage had only lasted 6.5 years, and the SSAGs provide for a duration of spousal support of between 3.25 and 6.5 years for a marriage of that length. As at the time of trial she had already been receiving interim spousal support for 9.5 years, in the amount of $8,000 per month up to March 1, 2020, and $2,178 per month thereafter. Notwithstanding that she was already 3 years beyond the longest period of suggested entitlement, she vigorously pursued a claim for spousal support of $15,000 per month on an indefinite basis.
[33] Her claims for unpaid rent were no less patently absurd. She claimed that the respondent owed her $901,176 in unpaid rent for the clinic on Hamilton Road, which amounts to rent for 5 full years at $3,468.73 per week. This was for an office that the respondent was precluded from even physically attending, due to the restrictions that were placed upon him as a result of her accusations of assault, charges which were ultimately dismissed. Aside from the obvious mitigation problems with her claim, it was predicated on an unsigned lease that did not even name the respondent as a party to the lease, but showed his corporation, a non-party to these proceedings, as the lessor. Her claim for clinician fees of $943,100 over 112 months is no less outlandish and unsupported by the evidence, and suffers from similar problems with respect to documentation.
[34] She made similarly unsubstantiated claims with respect to rent for the Florida properties. She claimed US$142,551 in rent for the Ivy Lake property, and US$63,376 for Sonnet Glen, despite evidence from her own expert showing the cumulative net income for both properties to be a tiny fraction of those amounts, her share of which would likely have been fully covered by payments she had received from the agent.
[35] I find that the applicant’s unreasonable behaviour has caused these proceedings to be delayed by several years, has resulted in an enormous waste of the court’s valuable resources in dealing with the many disclosure and other motions that had to be brought against her, has caused the respondent to waste legal fees in trying to move the matter forward, and has unduly complicated the trial by making it lengthier that it needed to be.
(ii) the time spent by each party, and,
(iv) any legal fees, including the number of lawyers and their rates:
[36] I will consider these factors together, since they are related.
[37] I am unable to consider the time spent by the applicant’s counsel, since she filed no submissions. I am similarly deprived of the benefit of knowing what fees and expenses she herself incurred, which is required by r. 24(12.2) to be filed whenever a party opposes a costs claim by the other party.
[38] The respondent claims costs incurred with his current counsel, Norman Pizzale. He was only retained in the summer of 2019. The respondent had been represented by other counsel continuously since the application was commenced in 2012, but no claim is being advanced for costs incurred by those counsel. This significantly reduces the applicant’s exposure to costs from what it might otherwise have been.
[39] The respondent filed a breakdown of his costs, which divided the claim into four categories: costs incurred subsequent to November 26, 2021; costs of mediation; costs between the breakdown of the mediation (November 12, 2021) and November 27, 2021; and cost prior to mediation. This approach was not particularly helpful, and did not provide the level of detail normally expected in a costs outline, particularly with respect to costs incurred prior to mediation.
[40] The summary of costs claimed is as follows:
Post November 26, 2021 costs: on full recovery basis, $86,000; on a partial recovery basis, $65,000;
Mediation, partial recovery costs: $24,000;
November 12 to 26, 2021 costs, on a blend of full and partial recovery: $14,000;
Partial indemnity costs prior to mediation: $22,000;
Total: $146,000 (assuming full recovery for post November 26 costs).
[41] Mr. Pizzale’s rate is $400 per hour, which I find to be reasonable given his 39 years of experience as a litigator. His articling student billed out at $140/hr., which is also reasonable.
[42] The costs outline shows that 195.8 hours were spent by counsel subsequent to November 26, 2021, up to and including the trial. Disbursements of $5,272.67 are included in that portion of the claim, and I find them to be reasonable. A total of 53.6 hours was spent on mediation. The respondent is claiming his half of the mediator’s fees of $8,277.25, due to the fact that the applicant unreasonably walked away after 3 ½ days, and I find that to be reasonable as well. A further 39 hours were spent between November 12 and 27. Given the number and complexity of the issues, the amounts in dispute, and the enormous volume of documentation that needed to be managed and the many briefs that needed to be prepared, I am satisfied that the time spent on this file is reasonable and proportionate.
[43] With respect to time incurred prior to the mediation, the respondent’s submissions leave me completely baffled. Schedule A, para. 6(d) states the following:
Partial indemnity prior to mediation based upon Rule 18(14) on the equalization issue $62,000 fees plus HST = $70,600 divided by 2, assuming equalization was half the time and then reduce to 65% to reflect partial indemnity only = $22,000;
[44] I have no idea what that means, except to say that the respondent is claiming partial indemnity costs prior to mediation of $22,000. The methodology for arriving at that number is a mystery, but $22,000 is a very reasonable amount of partial indemnity costs where the costs actually incurred were $62,000 plus HST.
[45] Returning to my analysis of the considerations set out in r. 24(12), I have already considered (iii), “any written offers to settle, including offers that do not meet the requirements of rule 18”. The other subrules are not relevant to this case.
[46] In terms of the respondent’s actual fees incurred, his costs to date are approximately $226,000 plus disbursements. Some of that relates to motions where the applicant was ordered to pay costs, and are covered by the line item in the judgment that gives him credit for $15,000 in that regard. However, that still leaves somewhere around $200,000 in costs that have been expended on this file. The principle of indemnity would militate in favour of a significant costs award, given the degree to which he is out of pocket.
[47] Ultimately, an award of costs should be proportionate to the amounts in dispute, and should represent an amount that the losing party should reasonably have expected to pay.
[48] The respondent’s costs, on a partial recovery basis, amount to $125,000. While it would be open to me to reduce this figure due to the fact that there was some divided success, and the respondent was unreasonable in his position on settlement of the issues other than equalization, it would equally be open to me to increase the costs award to express the court’s disapproval of the applicant’s obstructive behaviour and unreasonableness, including her failure to ever make a comprehensive offer to settle. In the end, I am satisfied that those considerations cancel each other out. I conclude that an award of partial recovery costs, fixed at $125,000 all inclusive, is appropriate in all the circumstances. It is proportionate to the amounts in dispute and, given how long this case has been dragging on, the number and complexity of the issues, and the enormous legal costs that have been incurred on both sides, such an award should be within the reasonable expectations of the losing party.
[49] Accordingly, costs are awarded to the respondent, payable by the applicant, fixed at $125,000 all inclusive. These costs shall be applied as a credit toward the net equalization payment owed by the respondent to the applicant.
Mr. Justice T. A. Heeney
Date: November 16, 2022