COURT FILE NO.: FS-13-78828-00
DATE: 2023-08-21
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Katherine Ann Mullin v. John Sherlock
BEFORE: Bloom, J.
COUNSEL: R. M. Halpern and J. Brown, for the Applicant
H. Hansen and Z. Martin, for the Respondent
COSTS ENDORSEMENT
I. INTRODUCTION
[1] This ruling addresses the issue of costs in the proceeding on which I released my ruling on the merits, which was dated June 22, 2023.
II. ARGUMENTS OF THE PARTIES
A. Arguments of the Applicant
[2] The Applicant seeks costs of $848,408.89 inclusive of HST, disbursements, expert fees, and costs.
[3] She argues that she is the successful party, and, therefore, presumptively entitled to costs under FLR 24(1). She amplifies that point by asserting that she was entirely successful in her property claim, and almost entirely successful in her claim for spousal support.
[4] She submits that by virtue of her two offers to settle she is entitled to full indemnity costs from September 26, 2022 under FLR 18(14).
[5] She argues that the Respondent’s bad faith is a relevant factor on the issue of costs. Specifically, she submits that he breached court orders especially in respect of disclosure. She relies on FLR 24(8).
[6] She contends that the costs award she seeks is reasonable and proportionate to the work done.
B. Arguments of the Respondent
[7] The Respondent argues that the costs sought by the Applicant are improperly high having regard to the key considerations of reasonableness and proportionality. He specifically contends that legal resources should have been consumed more efficiently by the Applicant; and submits that proof of the value of the Respondent’s business was ultimately made by the use of a minimal amount of documentation rendering unnecessary her expert evidence.
[8] Further, the Respondent argues that success was divided, conceding that the Applicant was successful on the property issue, but contending that he was more successful than the Applicant on the support issue. The Respondent buttresses this argument with reliance on FLR 24(6) and reference to the offers to settle made by the parties.
[9] The Respondent argues that bad faith on his part is not a proper consideration, since he has been sanctioned already for his lack of disclosure. He also asserts that the conduct of the Applicant was not reasonable.
[10] The Respondent argues that the costs award to the Applicant should be only for preparation for trial and attendance at trial, and not for matters previously the subject of costs awards. He submits that he acted reasonably at trial; and that his trial-related bill of costs of $139,995.70 is an apt reference point for a costs award to the Applicant.
[11] The Respondent accepts that the issues at trial were important and complex.
III. APPLICABLE STATUTORY PROVISIONS AND PRINCIPLES
[12] The following provisions from the Family Law Rules apply to the costs issue before me:
RULE 18: OFFERS TO SETTLE
Offers to settle
Definition
- (1) In this rule,
“offer” means an offer to settle one or more claims in a case, motion, appeal or enforcement, and includes a counter-offer. O. Reg. 114/99, r. 18 (1).
Application
(2) This rule applies to an offer made at any time, even before the case is started. O. Reg. 114/99, r. 18 (2).
Making an offer
(3) A party may serve an offer on any other party. O. Reg. 114/99, r. 18 (3).
Offer to be signed by party and lawyer
(4) An offer shall be signed personally by the party making it and also by the party’s lawyer, if any. O. Reg. 114/99, r. 18 (4).
Withdrawing an offer
(5) A party who made an offer may withdraw it by serving a notice of withdrawal, at any time before the offer is accepted. O. Reg. 114/99, r. 18 (5).
Time-limited offer
(6) An offer that is not accepted within the time set out in the offer is considered to have been withdrawn. O. Reg. 114/99, r. 18 (6).
Offer expires when court begins to give decision
(7) An offer may not be accepted after the court begins to give a decision that disposes of a claim dealt with in the offer. O. Reg. 114/99, r. 18 (7).
Confidentiality of offer
(8) The terms of an offer,
(a) shall not be mentioned in any document filed in the continuing record; and
(b) shall not be mentioned to the judge hearing the claim dealt with in the offer, until the judge has dealt with all the issues in dispute except costs. O. Reg. 114/99, r. 18 (8).
Accepting an offer
(9) The only valid way of accepting an offer is by serving an acceptance on the party who made the offer, at any time before,
(a) the offer is withdrawn; or
(b) the court begins to give a decision that disposes of a claim dealt with in the offer. O. Reg. 114/99, r. 18 (9).
Offer remains open despite rejection or counter-offer
(10) A party may accept an offer in accordance with subrule (9) even if the party has previously rejected the offer or made a counter-offer. O. Reg. 114/99, r. 18 (10).
Costs not dealt with in offer
(11) If an accepted offer does not deal with costs, either party is entitled to ask the court for costs. O. Reg. 114/99, r. 18 (11).
Costs consequences of failure to accept offer
(14) A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:
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. O. Reg. 114/99, r. 18 (14).
Costs consequences — burden of proof
(15) The burden of proving that the order is as favourable as or more favourable than the offer to settle is on the party who claims the benefit of subrule (14). O. Reg. 114/99, r. 18 (15).
Costs — discretion of court
(16) When the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms, even if subrule (14) does not apply. O. Reg. 114/99, r. 18 (16).
RULE 24: COSTS
Costs
Successful party presumed entitled to costs
- (1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal. O. Reg. 114/99, r. 24 (1).
Successful party who has behaved unreasonably
(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. O. Reg. 114/99, r. 24 (4).
Decision on reasonableness
(5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,
(a) the party’s behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;
(b) the reasonableness of any offer the party made; and
(c) any offer the party withdrew or failed to accept. O. Reg. 114/99, r. 24 (5).
Divided success
(6) If success in a step in a case is divided, the court may apportion costs as appropriate. O. Reg. 114/99, r. 24 (6).
Bad faith
(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. O. Reg. 114/99, r. 24 (8).
Setting costs amounts
(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. O. Reg. 298/18, s. 14.
Supporting materials
(12.1) Any claim for costs respecting fees or expenses shall be supported by documentation satisfactory to the court. O. Reg. 298/18, s. 14.
Same, opposing party
(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. O. Reg. 522/21, s. 9.
[13] In Beaver v. Hill, 2018 ONCA 840, 143 O.R. (3d) 519 (Ont. C.A.) at paras. 9 to 13, and 16 Justice Nordheimer for the Court addressed the issue of costs in family law matters:
[9] First, while the judge in Biant does make that statement, it is based on two decisions of other Superior Court judges, a close reading of which do not support the thrust of that statement. What those other cases do establish is that under the Family Law Rules, O. Reg. 114/99, judges are not constrained to the normal scales of costs found in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, since no scales of costs are mentioned in the Family Law Rules. Also, 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.
[10] Second, the respondent's assertion that this court's decision in Berta v. Berta (2015), 128 O.R. (3d) 730, [2015] O.J. No. 6844, 2015 ONCA 918 supports the "full recovery" approach to costs in family matters also reflects a failure to read the decision closely. What this court endorsed in that case was the principle that "a successful party in a family law case is presumptively entitled to costs" (at para. 94) subject, though, to the factors [page522] set out in Rule 24. This caveat is an important one since, as this court pointed out in Frick v. Frick (2016), 132 O.R. (3d) 321, [2016] O.J. No. 5625, 2016 ONCA 799, the Family Law Rules "embody a philosophy peculiar to a lawsuit that involves a family" (at para. 11).
[11] There is no provision in the Family Law Rules that provides for a general approach of "close to full recovery" costs. Rather, rule 24(12) sets out the appropriate considerations in fixing the quantum of costs. It reads:
24(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] As the wording of the rule makes clear, proportionality and reasonableness are the touchstone considerations to be applied in fixing the amount of costs.
[13] Further, a "close to full recovery" approach is inconsistent with the fact that the Family Law Rules expressly contemplate full recovery in specific circumstances, e.g., bad faith under rule 24(8), or besting an offer to settle under rule 18(14).
[16] That salient point also impacts on the respondent's offer to settle. Her offer to settle does not reflect a compromise, given that it included a requirement that the appellant completely abandon his constitutional argument. It is recognized that the failure of an offer to settle to contain a true element of compromise is a factor to be considered in deciding whether the offer properly impacts on the appropriate award of costs. In addition, judges should be very cautious about relying too heavily on this factor to increase or decrease the quantum of costs, when the specific Rules regarding such offers are not directly engaged. Even under rule 24(5)(a) of the Family Law Rules, it is but one factor that is to be considered.
IV. ANALYSIS AND ORDER
[14] There is no dispute that the proceeding involved complex and important issues relating to spousal support and property.
[15] I also take into account that the Applicant was substantially successful having regard to the positions taken in argument before me on the merits.
[16] I further find that the Respondent’s bad faith in failing to make proper disclosure impacted the trial by making proof of the property claim of the Applicant more difficult than it ought to have been. Accordingly, FLR 24(8) applies.
[17] I do not find that the Applicant conducted herself unreasonably in the proceeding. Her conduct was not perfect, but neither did it reach the standard of unreasonableness. She was dealing with a litigant who did not respect his fundamental obligation to disclose. She did not cross the line into unreasonableness, either in her approach to the litigation or her testimony.
[18] In view of the bad faith conduct of the Respondent and FLR 24(8), I need not address the impact of the offers to settle on the costs issue.
[19] Reasonableness and proportionality guide me, nonetheless, in my fixing of quantum.
[20] In my view $475,000.00 is appropriate as a sum to be paid by the Respondent to the Applicant as costs, inclusive of fees, disbursements, and applicable taxes. I order that sum to be paid by the Respondent to the Applicant immediately.
Bloom J.
DATE: August 21, 2023
COURT FILE NO.: FS-13-78828-00
DATE: 2023-08-21
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Katherine Ann Mullin v. John Sherlock
BEFORE: Bloom, J.
COUNSEL: R. M. Halpern and J. Brown, for the Applicant
H. Hansen and Z. Martin, for the Respondent
COSTS ENDORSEMENT
Bloom, J.
DATE: August 21, 2023