Court File and Parties

COURT FILE NO.: FS-19-42382 DATE: 2024 01 17 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Maria Martins, Applicant AND: Jose Maria Dias Martins, Respondent Antonio Mario Martins, Respondent

BEFORE: Chozik J.

COUNSEL: Lisa Bombardieri and Geoffrey Carpenter, counsel for the Applicant Jesse Schmidt, counsel for the Respondents

Costs Endorsement

[1] The Applicant seeks full recovery costs of $297,615.08 pursuant to Rule 24(8) or $242,865.44 pursuant to Rule 18(14) of the Family Law Rules, O. Reg. 114/99, for the trial of this matter. The trial lasted approximately 7 days.

[2] In Reasons for Judgment that I delivered orally on July 6, 2023, I found in favour of the Applicant (“Maria”) in respect of the following legal issues:

a. Division of the Respondent’s Jose’s pension in pay: I ordered that the pension in pay be equalized, and that Maria receive an equalization payment of approximately $356,000.

b. Spousal support: I found that Maria was entitled to indefinite spousal support but concluded that there is no income from which Jose could pay it. Having ordered Jose to pay a lump sum for the division of the pension, I found that it would not be fair to order him to pay spousal support from that pension as well. It would not be fair to allow Maria double recovery in this case.

c. Post-separation adjustments: I rejected Jose’s claims in respect of post-separation adjustments.

[3] It is not disputed that the Applicant is entitled to her costs. The issue is scale and quantum.

Positions of the Parties

[4] The Applicant takes the position that she is entitled to full recovery costs because I found that the Respondents acted in bad faith. In the alternative, she argues that full recovery is required because the result at trial was more favourable to her than two of the offers to settle she made. She has put forward a Bill of Costs in support of the quantum claimed.

[5] One set of submissions was received from both Respondents. The Respondents recognize that the Applicant is entitled to costs, since she was the most successful party. They argue that there is no basis upon which to order full indemnity costs and that the quantum is excessive.

[6] In particular, the Respondents argue that quantum sought by the is unreasonable because: (i) the Applicant was only partially successful at trial, (ii) the Respondents acted reasonably in respect of the proceeding itself by making several offers to settle and only acted in bad faith in respect of the transfer of the matrimonial home, and (iii) Jose does not have the funds to pay the costs award. The Respondents argue that if costs are ordered in the amount sought, Jose would be left destitute after a long-term marriage. The Respondents submit that the costs award should be no more than $50,000. No submissions were made in respect of how to apportion a cost award between Jose and Mario.

Legal Principles

[7] No party is absolutely entitled to costs in any case. Under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, the court retains wide discretion in ordering costs and in determining quantum. Discretion as to costs is always guided by reasonableness and proportionality: Berta v. Berta, 2015 ONCA 918; Frick v. Frick, 2016 ONCA 799.

[8] Rule 24 of the Family Law Rules, sets out the factors to be considered in awarding costs. These include the importance and complexity of the proceedings, each party’s behaviour, the time spent, and any written offers to settle. Under r. 24(12) the court is required to look at the reasonableness or unreasonableness of each party’s conduct during the dispute. Rule 24(5) sets out the factors according to which reasonableness of conduct is to be assessed.

[9] Rule 24(8) provides that if a party has acted in bad faith, the court “shall” award costs against party on a full recovery basis and order the party to pay them immediately.

[10] Rule 18(14) provides that a party who makes an offer and obtains an order that is as favourable or more favourable than the offer at trial, is entitled to full recovery of costs from the date of the offer unless the court orders otherwise. To be a valid Rule 18(14) offer, the offer must be served seven days before trial, must not be withdrawn before the trial starts and remain not accepted.

[11] Successful parties are presumed to be entitled to costs unless there is a good reason to rebut the presumption, such as bad behaviour. A “successful party” does not necessarily mean the party who won the issues. It can mean the party who made a favourable offer that would have eliminated the need for extended litigation. If success if divided, the court must apportion the costs accordingly.

[12] Modern costs rules are designed to foster three purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Serra v. Serra, 2009 ONCA 395, at para. 8.

Scale of Costs

[13] As I have set out, the Applicant seeks recovery of her costs on a full indemnity scale because (i) the Respondents acted in bad faith and, in the alternative, she made two offers that met the requirements of Rule 18(14).

[14] I agree with the Applicant that full recovery costs are warranted in this case. At the conclusion of the trial, in the Reasons for Judgement, I expressly found that the Respondents acted in bad faith. Their bad faith was not only in respect to the transfer of the matrimonial home, but also in this litigation. I found that they lied under oath in respect of a critical issue. They colluded with each other to give false evidence and conscripted others to come and give false evidence. I found that their conduct was “an affront to the administration of justice”. I found that it showed a total disrespect for the court and that administration of justice. Such conduct is the epitome of bad faith.

[15] The fact that the Respondents made several reasonable offers to try to settle during litigation pales in comparison to the egregious conduct that led to the finding of bad faith. I am not ignoring their efforts to settle, but those efforts do not and cannot cleanse the bad faith in this case.

[16] Considering my finding of bad faith, full recovery costs are mandated by Rule 24(8).

[17] In the alternative, I am also satisfied that full indemnity costs are warranted under Rule 18(14): the offer made by the Applicant on April 6, 2022 almost entirely mirrors the terms of the ultimate results save for the quantum of equalization, and the offer of November 30, 2022 almost exactly matches the outcome of the trial. Neither offer was withdrawn, and the Rule 18(14) applies.

Quantum

[18] In terms of quantum, the Applicant argues that her costs of $297,615.08 are reasonable. She cites several factors, which I have considered, but I cannot agree that this quantum is fair, reasonable, or proportionate. Her legal fees almost match the total equalization of $359,651.89 she was pursuing at trial. I agree with the Respondents’ submission that it is entirely unreasonable for someone to incur and seek reimbursement of costs which are essentially equivalent to the financial result she was ultimately seeking or got at trial.

[19] In assessing the quantum, I have considered that the Applicant was not successful in some regards. There were three central issues at the trial: (i) division of the pension in pay; (ii) spousal support, and (iii) post separation adjustments. The Applicant pursued but was not successful in respect of the following:

a. Imputing income to Jose of at least $45,000;

b. Payment of retroactive spousal support;

c. Payment of prospective spousal support;

d. Her claim that the Respondent be required to maintain her on his extended health benefits and death benefits; and

e. That the spousal support obligations constitute a first charge against Jose’s estate.

[20] I agree with the Respondents that Jose was successful in achieving a result that there shall be no ongoing spousal support owing to the Applicant and no obligation for either party to obtain and maintain life insurance and/or medical benefits policy of the other. I agree that a significant portion of the examinations of witnesses at trial was spent on addressing the parties’ financial means, needs and ability to work and that costs should therefore be apportioned pursuant to Rule.24(6) to reflect Jose’s success on this issue. However, I note that the Applicant was successful on the spousal support issue in that I found that she was entitled to support: she just could not get double recovery.

[21] There were two significant factual issues in this case that related to the circumstances surrounding the transfer of the home and the signing of the waiver of survivor benefits by Maria. I found in favour of Maria in respect of both issues. I also found in favour of Maria in respect of her health issues, which related to her inability to work. Jose had denied that she had any such issues, which was contracted by the unchallenged evidence of her doctor who diagnosed Maria with several serious conditions during the marriage. Significant time was spent on this despite uncontradicted objective medical evidence.

[22] I have considered that the trial was adjourned once through no fault of the parties, because it could not be reached on the trial list. This resulted in additional costs.

[23] I have considered that a significant part of this trial was spent on litigating about the transfer of the matrimonial home and related issues. I ultimately found that the Respondents lied under oath about the timing and circumstances of the transfer and colluded to present false evidence to the court. I agree with the Applicant that she incurred significant costs as a direct result of the Respondents’ bad faith conduct. Had they not attempted to mislead the Applicant and the court, the matter would have been greatly simplified. The transfer of the home, and the false narrative around it, resulted in great expenditure of time and resources by the Applicant, for which the Respondents must be held liable.

[24] I have also considered the Respondents’ submission that Jose cannot afford to pay costs. This was apparent from the evidence at the trial. However, he is not the only Respondent in this case. There is no evidence of Mario’s financial means in this case. Mario was very involved in the fraudulent conveyance of the matrimonial home and the attempt to mislead the Applicant and the court.

[25] I am not unsympathetic to Jose’s circumstances. I recognize that the marital breakdown has been financially devastating to him. He has paid Maria half of the equity in the matrimonial home, their only significant asset. He must also pay her the equalization payment I ordered because of the division of his pension in pay. He only has his share of the equity in the home to do this. Whatever is left of his equity in the home will be eaten up by legal costs – his costs and his share of Maria’s costs. He receives a pension of $44,000 per year. It is very sad that after working hard and saving money for most of his life, he is left in this financial position.

[26] However, Maria also worked hard all her life and made great sacrifices during the marriage. She too is in a precarious financial position, with no ability to earn and income and no ongoing spousal support at the age of 51. As I have found, she was entitled to indefinite spousal support from Jose but cannot collect it and has incurred significant legal fees to enforce her legal rights.

[27] Despite this, I am of the view that would not be fair in this case to reduce the costs award because Jose cannot afford to pay them: the purposes of costs awards are no less applicable to such individuals as Jose, who should have been the most motivated to pursue resolution instead of embarking on a very expensive trial he could not afford to lose. Instead, he acted in bad faith when he fraudulently conveyed the matrimonial home to Mario to try to frustrate Maria’s ability to collect an equalization payment and then deliberately told lies at the trial and conspired with others to lie to try to cover up the purpose of that transfer. It should have been obvious that these parties could not afford a trial of this length, yet they insisted on one. In the end, neither of them really wins.

[28] Ultimately, the quantum of costs must be fair, reasonable, and proportionate to the issues. The trial in this case was unnecessarily protracted by the bad faith conduct of the Respondents. However, there were also other neutral factors that contributed to the length of the trial: it was a hybrid trial and conducted with the assistance of a Portuguese interpreter, which the parties and some of the witnesses required.

[29] In all the circumstances, I find that $150,000 inclusive of disbursements and HST is a fair, reasonable, and proportionate amount. I am of the view that this is in line with what an unsuccessful party could reasonably be expected to pay in the circumstances of this case. Given my finding of bad faith against both Respondents and the fact that this trial became largely about the fraudulent conveyance of the matrimonial home, I am of the view that it is fair to hold both Respondents jointly and severally liable for this costs award.

Conclusion

[30] Considering the various factors under Rule 24, I find that costs of $150,000 inclusive of disbursements and HST are fair, reasonable, and proportionate in the circumstances. The Respondents shall pay these costs to the Applicant forthwith.

Chozik J. Date: January 17, 2024