Court File and Parties

COURT FILE NO.: FC-00056237 DATE: 2023/09/27 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DANIEL KIRK HOWARD, Applicant AND: TEAHA ADELE HOWARD, Respondent

BEFORE: The Honourable Justice L. Madsen

COUNSEL: Brian Kelly, Counsel for the Applicant Gregory Dewar, Counsel for the Respondent

HEARD: In Chambers

Costs Endorsement

[1] Mr. Howard brought an “urgent” motion to set aside the endorsement of Justice Tweedie made May 17, 2023, on the basis of what he alleged was fraud on the part of Ms. Howard.

[2] In my endorsement dated July 14, 2023 I dismissed the motion, finding that the evidence relied upon was neither clear nor convincing, and that the totality thereof did not support a fraud finding.

[3] I invited written costs submissions on a set schedule and noted that Ms. Howard is presumptively entitled to costs as the successful party, subject to any Offers that may have been made.

[4] Both parties provided written submissions and their respective bills of costs.

[5] Both parties incurred costs of approximately $20,000 on this motion, which required facta and briefs of authority, and was argued as a long motion.

[6] Ms. Howard seeks costs in the amount of $20,923.98, being full recovery of the costs she incurred to defend the motion. She argues that she was the successful party, and that Mr. Howard acted in bad faith in making the fraud allegation. She emphasizes that allegations of fraud must not be made lightly and require a vigorous defense as they can cause significant damage to a person’s dignity and reputation. She also notes that she served an Offer dated July 4, 2023 under which Mr. Howard’s motion would be withdrawn and each party would bear their own costs.

[7] Mr. Howard seeks an Order that no costs be payable or a nominal amount of costs only. He says that Ms. Howard behaved unreasonably by not producing certain medical information and that he had a reasonable basis for his belief that she had made fraudulent statements to Justice Tweedie. His bill of costs reflects total fees and disbursements of $20,341.98.

Principles

[8] It is by now trite law that costs provisions set out in the Family Law Rules are intended to foster four important principles: to partially indemnify successful litigants for the cost of litigation; to encourage settlement; to discourage and sanction inappropriate behavior by litigants; and to ensure that cases are dealt with justly under subrule 2(2) of the Family Law Rules. Serra v. Serra, 2009 ONCA 395, Mattina v. Mattina, 2018 ONCA 867, Beaver v. Hill, 2018 ONCA 840.

[9] The Family Law Rules emphasize the importance of reasonableness and proportionality in the court’s approach to setting of costs. Mattina supra at 10; Beaver, supra at 4.

[10] The overall objective in a costs assessment is to determine an amount of costs that is fair and reasonable for the unsuccessful party to pay the successful party in all of the circumstances. Delellis v. Delellis, 2005 CarswellOnt 4956 at 9.

[11] Determining the fair and reasonable amount is not a mechanical exercise. It is more than adding up the lawyers’ dockets. Jackson v. Mayerle, 2016 ONSC 1556 at 17.

Success

[12] Under Rule 24, the starting point is that the successful party is entitled to costs. See Rule 24(1). Sims - Howarth v. Bilcliffe, 2000 CarswellOnt 299.

Bad Faith

[13] Under Rule 24(8), if a party has acted in bad faith, the court shall decide costs on a full recovery basis. As set out by Justice Pazaratz in Scipione v. Sordo, 2015 ONSC 5982 at 96 - 99, a finding of bad faith requires a fairly high threshold of egregious behaviour such that a finding of bad faith is rarely made.

[14] A finding of bad faith implies a conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction, or obfuscation. The essence of bad faith is that when a person suggests his actions are for one purpose, they are for another.

[15] A finding of bad faith, however, is not a blank cheque in terms of costs. Costs overall must still be reasonable and proportionate in all of the circumstances. See Jackson v. Mayerle, 2016 ONSC 1556 at 91, Slongo v. Slongo 2015 ONSC 3327 at 23.

Allegations of Fraud

[16] Allegations of fraud must not be made lightly. Such allegations should not be made unless there is a reasonable likelihood that they can be proven. Where allegations of fraud are made without a proper evidentiary foundation and have no reasonable prospect of being established, the party will be subject to cost sanctions. Sonia v. Ratan 2023 ONSC 982 at 31, Bargman v. Rooney, 1998 CarswellOnt 5113 at 19, 20.

[17] The Ontario Court of Appeal has held that unfounded allegations of fraud may attract serious cost consequences as a form of chastisement and a mark of the Court’s disapproval as the allegations go to the very heart of a person’s integrity. 2651171 Ontario Inc. v. Brey, 2022 ONCA 205 at 12.

[18] A party that makes an allegation of fraud that is not proven ought reasonably to expect a punitive costs award. Unsubstantiated fraud allegations are sufficiently reprehensible to attract punitive costs where a party has access to information to know that the other is merely negligent and not dishonest. Preiano v. Cirillo, 2021 ONSC 2944 at 20 – 22.

Offers to Settle

[19] Rule 18 governs offers to settle and costs consequences flowing therefrom.

[20] Rule 18(14) provides as follows:

A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:

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

[21] Rule 18(15) provides that the party who seeks the benefit of Rule 18(14) has the onus to show that the order of the court is as favourable as or more favourable than his or her offer to settle.

[22] Rule 18(16) provides that even if an offer to settle does not meet the formal requirements of Rule 18(14), the court may take account of such offers in determining costs.

Rule 24(12) Factors

[23] Under Rule 24(12) a court must consider the following factors:

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 expenses properly paid or payable; and vii. any other relevant matter.

Application

[24] I find that the fair and reasonable amount for Mr. Howard to pay to Ms. Howard on account of his unsuccessful motion alleging fraud is $17,500 inclusive of HST and disbursements. I reach this conclusion for reasons including the following:

a. Ms. Howard was the successful party on the motion. She sought that the motion be dismissed, and it was. b. Ms. Howard was also successful in relation to her Offer to Settle. Had Mr. Howard accepted her Offer, which was a Rule 18 Offer served 8 days before the motion was heard, the substantive result would have been the same and each party would have borne their own costs. The Order of the Court was thus more favourable to Ms. Howard than was her Rule 18 Offer and she is entitled to full recovery costs from the date it was served. c. I do not find that Ms. Howard behaved unreasonably, as alleged by Mr. Howard. This motion was not about her binge drinking incident in February 2023. That incident was before Justice Tweedie and considered by her when she made her decision about parenting. It was also not about the production of the hospital records which were produced and before me on this motion. d. The threshold to prove fraud is high and the allegation ought not be made unless there is a reasonable likelihood of the finding being made. Mr. Howard should have assessed the significant frailties of the hospital records and considered them against the substantial weight of the balance of the evidence available about Ms. Howard’s functioning in the community and with the children (see the details set out in paragraph 23 of my endorsement) before making an allegation as serious as fraud. It was not reasonably likely that a finding of fraud would be made by the Court on the totality of the evidence. e. I find that alleging fraud as against the totality of the evidentiary record summarized in my July 14, 2023 endorsement constitutes bad faith. This finding of bad faith attracts full recovery costs, subject to the overriding principles of reasonableness and proportionality. f. I will not repeat my endorsement on the substantive motion here. However, briefly, Mr. Howard alleged that Ms. Howard lied to Justice Tweedie on a parenting motion heard April 14, 2023, when she stated that she had had one incident of binge drinking since 2020. In support he pointed to hospital records related to that incident, which contained several statements which were not only contradictory but also in some cases unattributed double hearsay. g. For example, the notes contained apparent statements to an unnamed paramedic, then repeated by several other medical professionals in the notes stating that Ms. Howard “drinks vodka daily” after the children go to school. At the same time, the records also contained Ms. Howard’s denials to emergency room staff that she had been drinking and stated that she presented with slurred speech and was hard to understand. It should have been clear to Mr. Howard that on such a flawed documentary record, a fraud finding would be unlikely. h. As I noted in the endorsement on the motion, Ms. Howard’s materials before Justice Tweedie confirmed that she went to the hospital to assume responsibility for her drinking and that once there she was ashamed and denied drinking. This is consistent with the records and no basis for a fraud finding. I also set out in my endorsement the extensive further evidence which is inconsistent with drinking vodka daily to excess while parenting. See paragraph 23. Again, Mr. Howard should have considered the hospital records against the totality of the evidence before making such a serious allegation. i. As noted above, a fraud allegation goes to the integrity and dignity of the person against whom it is made. Further, from a litigation perspective, the consequences of a fraud finding are significant, casting a long shadow and shaping the perception of credibility of a litigant henceforth. Practically speaking, in this case, a finding of fraud would likely have led to a full re-examination of the appropriate interim parenting arrangements with an outcome wholly at odds with Ms. Howard’s position in the litigation overall. j. The legal fees of the parties are similar, although significant. I accept the submission that in the face of a fraud allegation a vigorous and full defense is required. Mr. Kelly’s fees prosecuting the motion are virtually the same as Mr. Dewar’s defending it. Mr. Dewar spent approximately twice as much time as Mr. Kelly, albeit at a lower hourly rate. Both counsel’s rates are reasonable considering their respective seniority. k. Mr. Howard did not serve an Offer to Settle. I accept however, that a motion such as this tends to be an all or nothing proposition for the alleging party. l. To meet such a serious allegation, Ms. Howard had little choice but to marshal extensive evidence to support her position. Her lawyer was required to thoroughly research the caselaw on fraud, given the infrequency with which such allegations are made. A detailed and careful factum was required. It is to be expected that a full response to the allegation would be time-consuming and costly. I note, also, that the court required that the motion be heard as a long motion, also increasing expense. m. While Ms. Howard, as a starting point, is entitled to full recovery costs, the principles of reasonableness and proportionality necessitate several reductions to the amount claimed by her counsel: first, I find that there is likely some duplication on the July 4 and 11, 2023 docket entries with respect to the “preparation” for the attendances on July 5 and July 12, 2023 respectively (after the materials had been prepared, the research had been done, and documents filed). In addition, I find that the amount claimed for preparation of the costs submissions and attachments is high in the circumstances. While I balance this against the fact that Mr. Howard’s fees were comparable, I also note Mr. Kelly’s significantly higher hourly rate and fewer hours spent. n. In the result, balancing these factors, I find that the fair, reasonable, and proportionate amount for Mr. Howard to pay Ms. Howard on account of his unsuccessful motion alleging fraud is $17,500, inclusive of HST and disbursements. This amount, in my view, balances the entitlement to full recovery in these circumstances against the reasonableness of the fees claimed overall, recalling that costs should be paid on a full recovery basis does not amount to a blank cheque.

[25] Accordingly, Mr. Howard shall pay $17,500 inclusive of HST and disbursement to Ms. Howard within 60 days.

L. Madsen, J. Released: September 27, 2023