COURT FILE NO.: FC-20- 1705 DATE: 2024/06/27

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Keith Murch, Applicant AND Kristine Lewis, Respondent

BEFORE: Blishen J.

COUNSEL: Carol Craig, for the Applicant Mark Smith, for the Respondent

HEARD: In Writing

COSTS ENDORSEMENT

Introduction

[1] This 10-day trial was focused on: parenting - specifically the selection of school for the parties’ 12-year-old daughter, Pippa and whether she should participate in horseback riding; payment of ongoing and retroactive child support (CS); retroactive s. 7 expenses; imputation of income to Dr. Murch; inclusion of Dr. Lewis’s survivor pension in her Net Family Property Statement (NFP); Dr. Murch’s claim for post-separation adjustments for household expenses and spousal support (SS) claimed by Dr. Lewis.

Positions of the Parties

[2] Dr. Murch argues he was predominantly successful at trial and his behaviour was reasonable while Dr. Lewis’s was not, particularly given a lack of complete and ongoing financial disclosure and lack of clarity as to her position on several important substantive issues. He claims partial and substantial indemnity costs in the amount of $122,980.

[3] Dr. Lewis argues she was successful on several important issues at trial, overall success was divided, and Dr. Murch behaved unreasonably by not paying any child support prior to trial. She indicates that although there was some delay in providing financial disclosure, it is not a factor to be considered as poor conduct on her part nor should it have any significant bearing on costs. She claims partial and full indemnity costs in the amount of $152,291.23.

General Principles

[4] Modern costs rules are designed to foster four fundamental purposes:

1. to partially indemnify successful litigants;
2. to encourage settlement;
3. to discourage and sanction inappropriate behaviour by litigants; and
4. to ensure that cases are dealt with justly pursuant to r. 2 (2) of the Family Law Rules O.Reg. 114/99 as am. (FLRs). See Mattina v. Mattina, 2018 ONCA 867.

[5] Pursuant to r. 24 (1) of the FLRs, there is a presumption that a successful party is entitled to costs. Consideration of success is the starting point in determining costs. See Sims-Howarth v. Bilcliffe, [2000] O.J. No. 330 (S.C.J.-Family Court). Offers to settle are important and can be the yard stick by which to measure success. They are significant in determining both liability for costs and quantum. See Osmar v. Osmar (2000), 8 R.F.L. (5th) 387, at para. 7 (Ont. S.C.) and Lawson v. Lawson, 2008 CarswellOnt 2819, at para. 7 (Ont. S.C.). In addition to a consideration of settlement offers, the position of the parties at trial should also be carefully examined.

[6] Although consideration of success is the starting point in determining costs, the successful party is not always entitled to costs. As noted by the Ontario Court of Appeal in Mattina v. Mattina:

An award of costs is subject to: the factors listed in r. 24(12), r. 24(4) pertaining to unreasonable conduct of a successful party, r. 24(8) pertaining to bad faith, r. 18(14) pertaining to offers to settle, and the reasonableness of the costs sought by the successful party: Berta v. Berta, 2015 ONCA 918, at para. 94.

[7] Subrule 24 (6) of the FLRs provides that if there is divided success, a court may apportion costs where appropriate.

Offers to Settle

[8] Subrule 18 (14) of the FLRs states:

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:

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. O. Reg. 114/99, r. 18 (14).

[9] Pursuant to subrule 18(16), when exercising discretion over costs, the court may consider any written offer to settle, the date it was made and its terms, even if subrule 18(14) does not apply.

[10] Both parties provided formal Offers to Settle all outstanding issues prior to the January 14, 2022, Settlement conference.

[11] Dr. Lewis’s Offer on all issues was the only one she made before trial. It included a comprehensive parenting plan attached as a schedule.

[12] On September 3, 2022, Dr. Murch provided three further partial offers to settle:

1. ongoing and retroactive child support, ongoing s. 7 expenses and division of RESPs,
2. retroactive s. 7 expenses, and
3. parenting.

[13] On September 7, 2022, he provided a partial offer to settle spousal support (SS) based on no SS owing from either party and a full SS release being signed by both parties.

Success

Parenting

[14] Prior to trial, both parties agreed to joint decision-making and equal parenting time with their daughter Pippa. Both made Offers reflecting that agreement and provided comprehensive, similar plans which were to a large extent reflected in the ultimate court order.

[15] The parenting issues argued at trial were selection of Pippa’s school and whether she would participate in horseback riding. Dr. Lewis was successful on both issues at trial. Dr. Murch did not specifically address either issue in his Offers.

Child Support

[16] Ongoing and retroactive base child support and ongoing s. 7 expenses were resolved on consent after trial. Neither party was more successful than the other.

[17] At trial I accepted the evidence of both parties as to retroactive s. 7 expenses and made an order accordingly. Both parties did better than their offers. Neither party was more successful.

[18] Dr. Lewis’s offer simply stated a proposed monthly amount commencing January 1, 2020. As noted in the trial judgment, the details regarding the method of calculating CS were unclear. Ultimately, mid-trial, she agreed to using the set-off method which had been prosed by Dr. Murch throughout.

[19] Although he was the higher income earner, Dr. Murch did not pay any CS until that issue was resolved after trial and an order was made on consent. His last offer prior to trial included both ongoing and retroactive CS but indicated the retroactive CS owing would be “included in the overall calculations stemming from issues to be determined at trial.”

[20] Although the method of calculating CS was unclear in Dr. Lewis’s offer, what was clear was her claim for Child support and Pippa’s need and right to support as per the Child Support Guidelines, O. Reg. 391/397, as am. and the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp), as am..

[21] I find Dr. Murch’s non-payment of CS from the date Dr. Lewis left the home to the resolution and consent order after trial to be unreasonable behaviour.

Imputation of Income to Dr. Murch

[22] Dr. Lewis argued at trial that after Dr. Murch retires from his full-time job as a large animal veterinarian, income should be imputed to him for the purposes of CS and SS. I declined to do so for reasons outlined in the judgement. Dr. Murch was successful on that issue.

Equalization of Net Family Property

[23] Having considered his offers and the trial judgement, I find overall Dr. Murch was the successful party on equalization which was an important and time-consuming issue at trial.

[24] The most significant equalization issue was the treatment of Dr. Lewis’s entitlement to a survivor pension. This was one of the most contentious and complex issues at trial, taking a great deal of trial time.

[25] Dr. Murch was successful in arguing the survivor pension should be included in Dr. Lewis’s family property and in obtaining an order that her interest in the matrimonial home be transferred to him in partial satisfaction of the equalization payment owing pursuant to s. 9(1)(d)(i) of the Family Law Act, R.S.O. c.F.3, as am..

Post-Separation Adjustments

[26] Dr. Lewis was successful in having Dr. Murch’s claim for post-separation adjustments for household expenses dismissed.

Spousal Support

[27] This was another significant, contentious financial issue at trial.

[28] Dr. Lewis was successful in obtaining an order for both ongoing and retroactive SS. Dr. Murch did not made an offer for payment of any SS.

[29] I note that Dr. Lewis’s offer was for indefinite SS subject to a material change in circumstances, which would not include Dr. Murch’s retirement until he reached age 75, whereas the decision requires a review of SS when Dr. Murch retires. Nevertheless, I find Dr. Lewis was the more successful party on this issue.

Overall Success

[30] Overall, success was divided.

[31] I find Dr. Lewis the more successful party on the two parenting issues argued at trial, particularly Pippa’s school, on spousal support, and in defending the claim for post separation expenses.

[32] Dr. Murch was the more successful party on the equalization of NFP and the method of partially satisfying the payment, and in defending the claim for imputation of income.

[33] Arguably both parties are entitled to some costs. If success is divided, Rule 24 (6) indicates the court may apportion costs as appropriate.

[34] In Scipione v. Del Sordo, 2015 ONSC 5982 (Ont. S.C.J.) the court noted that r. 24(6) requires a contextual analysis. Not all issues are equally important, complex, time consuming or expensive to determine.

[35] In this case, I find the issue of Equalization of NFP, particularly whether to include the survivor pension in Dr. Lewis’s family property, and the issue of SS to have been the most important, complex and time consuming. Each taking approximately 1/3 of the trial time. Dr. Murch was successful on equalization while Dr. Lewis was successful on SS. The other 1/3 of the time was spent on the remaining issues and success was divided.

Quantum of Costs

[36] Costs awards are discretionary. Two important principles in exercising discretion are reasonableness and proportionality. See Beaver v. Hill, 2018 ONCA 840.

[37] Sub rule 24 (12) of the FLRs sets out the relevant factors in determining the quantum of costs:

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.

[38] In addition to the factors listed under r. 24 (12) an award of costs is also subject to r. 24 (4) pertaining to unreasonable conduct of a successful party, r. 24 (8) pertaining to bad faith, r. 18 (14) pertaining to offers to settle and the reasonableness of the costs sought by the successful party. See: Berta v. Berta, 2015 ONCA 918, at para. 94.

[39] I find the time spent, legal fees and expenses outlined in each party’s Bill of Costs reasonable and proportionate to the importance and complexity of the issues at trial.

[40] Neither party argues bad faith in this case, but both argue that the other was unreasonable. The criteria for determining the reasonableness of the parties’ behaviour are outlined in r. 24 (5) as follows:

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).

[41] As noted above both parties made offers to settle on the substantive issues.

[42] Unfortunately, Dr. Lewis’s behaviour in failing to provide complete ongoing financial disclosure and her lack of clarity as to her position on the method of calculating CS and SS until just before or during the trial caused delay and made it difficult to meaningfully discuss and possibly resolve the financial issues prior to trial. In addition, her final draft order had no proposed amount payable for retroactive s. 7 expenses nor did it include anything for post-separation household costs, despite there being extensive evidence on both issues at trial.

[43] As stated in the trial judgement at paras 36 - 38:

As noted by the OCA in Frick v. Frick, 2016 ONCA 799 (Ont. C.A.), The Family Law Rules (FLRs) embody a philosophy peculiar to a family law proceeding. They provide for active judicial case management, early, complete, and ongoing financial disclosure, and an emphasis on resolution, mediation, and ways to save time and expense in proportion to the complexity of the issues.

In Roberts v. Roberts, 2015 ONCA 450, the Ontario Court of Appeal noted the breach of the disclosure obligation causes real harm:

“Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled.”

[44] Up to and during the trial in this case the lack of disclosure and clarity as to Dr. Lewis’s position, impeded progress of the application and possible settlement of the issues, caused delay, and generally acted to the disadvantage of Dr. Murch.

[45] I find Dr. Lewis behaved unreasonably and therefore, although successful on SS and the other issues outlined above, it is appropriate to deprive her of costs, pursuant to Rule 24(4).

[46] Dr. Murch also behaved unreasonably. Although he was the higher income earner and remained in the matrimonial home, he did not pay any CS prior to trial, despite Dr. Lewis’s difficult financial circumstances. This resulted in an order for a significant amount of retroactive CS. Dr. Murch’s wait and see attitude to CS as outlined in his offer to pay retroactive child support after the overall calculation of amounts owing between the parties, was unreasonable and unfair to his daughter who was deprived of CS for approximately 3 ½ years. His Offer of Sept 6, 2022, did provide for ongoing CS as of January 2023 but it was tied to offers regarding retroactive CS, RESPs and S. 7 expenses. In addition, no SS was being paid and Dr. Murch continued to reside in the matrimonial home. Given his unreasonable behaviour, as with Dr. Lewis, I find Dr. Murch should be deprived of costs.

Conclusion

[47] Assessing costs is “not simply a mechanical exercise”. See: Delellis v. Delellis and Delellis, [2005] O.J. No. 4345. In that case, Justice Aston indicated as follows at para 9:

Costs must be proportional to the amount in issue and the outcome. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful litigant.

[48] This is an unusual case. Each party was successful on one of the two most important and complex issues at trial – Dr. Murch on Equalization and Dr. Lewis on SS. I find each took approximately 1/3 of the trial time. Success on the other less complex and time-consuming issues was divided.

[49] Both parties behaved unreasonably. Dr. Lewis’s failure to provide ongoing complete financial disclosure and lack of clarity on the issues, along with Dr. Murch’s refusal to pay any CS, although he continued to reside in the matrimonial home and despite Dr. Lewis’s difficult financial circumstances, made settlement difficult.

[50] Therefore, there will be no costs payable by either party to the other. The parties are to bear their own costs.

Date: June 27, 2024

COURT FILE NO.: FC-20- 1705 DATE: 2024/06/27

ONTARIO SUPERIOR COURT OF JUSTICE

RE: Keith Murch, Applicant AND Kristine Lewis, Respondent

BEFORE: Blishen J.

COUNSEL: Carol Craig, for the Applicant Mark Smith, for the Respondent

COSTS ENDORSEMENT

Blishen J. Released: June 27, 2024