Court File and Parties

COURT FILE NO.: FC-22-1273 DATE: 2024/08/21 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Karen Clark, Applicant AND: Corey Clark, Respondent

BEFORE: Somji J.

COUNSEL: Shawn Duguay, for the Applicant Alexandra Kirschbaum for the Respondent

HEARD: In Writing

Costs Endorsement

[1] The Applicant Karen Clark seeks full-recovery costs in the amount of $151,555 following her success on an application for the valuation of the Respondent’s business Ottawa Garage Door Systems Inc. Clark v Clark, 2024 ONSC 1547. The application was heard during a 2 ½ day focused trial held November 21, 22, and December 8, 2023. The total costs requested include the expert’s fees of $31,715 and HST.

[2] The Respondent argues that opposing counsel engaged in unreasonable conduct disentitling her to costs, or alternatively, if costs are awarded, they should be reduced to $50,000. The Respondent argues that the Applicant’s prior counsel Phil Augustine failed to approach the litigation in a cost-effective manner and consequently, the costs sought are excessive. In addition, the Respondent argues that aspects of the offers to settle made were unreasonable, and therefore, the court should exercise its discretion not to award full recovery costs.

[3] The issues to be decided are one, is the Applicant entitled to costs, and two, if so, what quantum is fair and reasonable in the circumstances of this case?

Issue 1: Is the mother entitled to costs?

[4] Entitlement and quantum of costs is in the discretion of the judge: Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[5] Rule 24 sets out the legal framework for cost orders in family cases: Mattina v Mattina, 2018 ONCA 867 at para 9.

[6] The starting point is that the successful party is presumptively entitled to costs: r. 24(1) of the Family Law Rules, O. Reg. 114/99 as am (“FLR”). However, in assessing entitlement, judges must consider one, written offers to settle: rr. 18(14) and 24(12)(a)(iii); two, any unreasonable conduct of the successful party: r. 24(4); and three, if a party has acted in bad faith: r. 24(8).

[7] The Applicant was the successful party on the motion and is presumptively entitled to costs: r. 24(1) of the FLR. Counsel’s failure to agree to exchange books of authorities until the day of trial is not conduct that that would disentitle the Applicant to her costs. The Applicant made reasonable offers to settle and took the necessary steps to move the matter forward. I find there was nothing in the Applicant’s conduct that would disentitle her to a costs award.

Analysis

[8] In determining quantum of costs, the parties and court must consider that 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, as per r. 2(2), that cases are dealt with justly: Mattina at para 10.

[9] Rule 24(12) requires a judge to consider the following in determining quantum:

(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 r. 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.

Offers to Settle

[10] Rule 18(14) allows for full recovery of costs where certain conditions are met including whether the offer to settle is more favorable than the outcome of the hearing. Here, the Applicant served two Offers to Settle. The Applicant served a first Offer to Settle on October 27, 2023, and proposed a gross company value of $3,000,000 whereas my decision valued the company at $3,290,000. The Applicant served a second Offer to Settle on November 17, 2023, four days before the focused trial, which adopted a net value of $2,500,000. I found the net value of the company to be $2,814,700. The Applicant obtained a result which was more favourable than both of her Offers. All other requirements under Rule 18(14) were met entitling the Applicant to full recovery of a portion of her costs.

[11] The Respondent agrees the Offers to Settle were more favorable than the ultimate outcome, but relies on the decision in Chomo v Hamilton, 2016 ONSC 6232, to argue that the costs provisions in the Applicant’s Offers to Settle disentitle her to recovery of full indemnity costs. I disagree.

[12] Chomo dealt with a situation in which a party’s Offer to Settle contained specific and punitive costs provisions which Pazaratz J concluded predetermined the issues on the offer, and therefore, precluded the application of Rule 18. As stated by Pazaratz J, an offer to settle substantive terms which also includes a predetermination of costs perverts the Rule 18(14) analysis, because the party ends up trying to claim credit for accurately predicting a costs determination a judge has not yet made:” Chomo at para 24.

[13] In contrast, the Applicant’s Offers to Settle contained language that if the offers were accepted prior to a specific date, no costs would be awarded, and if accepted after that date, the parties would agree on costs or costs would be determined by the court which I find to be reasonable provisions that do not interfere with the ability to accept the offers’ substantive terms. Furthermore, if the costs aspect of the offers was an issue, no counter offers appear to be made for consideration to settle the substantive issues and thereby avoid, at minimum, a costly two and half day hearing.

[14] Even if I am incorrect and Rule 18(14) does not apply in this case, I would exercise my discretion pursuant to Rules 18(16) and 24(12)(b) and grant an elevated costs award approaching full indemnity for this period given that, consistent with the principles in Mattina, the Applicant made reasonable and timely Offers to Settle for the purpose of encouraging settlement: Chomo at para 30. The first offer was made 24 days before the scheduled hearing and was followed by a second offer just shortly before the hearing.

[15] I find the Applicant is entitled to full recovery costs for the period from October 27 to December 8, 2023.

Conduct of the Parties

[16] The court may issue an elevated costs award over and above partial indemnity where one party’s conduct has been unreasonable. Unreasonable conduct includes conduct that is: 1) disrespectful of other participants or the court; 2) unduly complicates the litigation; or 3) increases the costs of litigation: Harper v Smith, 2021 ONSC 3420, at para 3, citing Beaver v Hill, 2018 ONSC 3352 (“Beaver v Hill (ONSC)”), at para 51, rev’d on other grounds, 2018 ONCA 840. Poor litigation decisions and advancing unreasonable claims or filing meritless and incomplete pleadings may also justify an elevated costs award: Ali Hassan v Abdullah, 2023 ONCJ 186, at para 61; Beaver v Hill (ONSC), at para 51.

[17] However, if a party’s conduct amounts to bad faith, the court may order costs on a full recovery basis as per r. 24(8) which reads as follows:

24.(8) BAD FAITH—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.

[18] There is a difference between bad faith and unreasonable behaviour. Bad faith is a high threshold. It is not synonymous with bad judgment or negligence; rather, it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction or obfuscation: see: Scipione v Scipione, 2015 ONSC 5982, at para. 96.

[19] The Applicant argues that the Respondent intentionally delayed disclosure of the pertinent expert report in this matter thereby entitling her to full recovery costs. At the Settlement Conference of August 16, 2023 the parties agreed to have their experts “hottub” their opinions which occurred on October 5, 2023. During this meeting, the Respondent’s expert revealed he had issued “revised reports” in August 2023. However, no such reports had been disclosed to the Applicant. Furthermore, when the revised reports were provided on October 5, 2023, they related to the holding company and not Ottawa Garage Door Systems which was the subject of the valuation dispute. It was only on October 16, 2023, that the Applicant received the revised Ottawa Garage Door Valuation dated August 10, 2023. Similarly, the Applicant received an updated appraisal of the holding company Wescar Property on October 23, 2023, even though the appraisal had been revised July 6, 2023.

[20] The Respondent’s counsel argues that the delays were not intentional but rather the result of confusion arising from a change in counsel. Furthermore, they argue there was no prejudice to the Applicant as the hearing was not for another 35 days.

[21] In these circumstances, I find the Respondent’s conduct does not appear to be intentional and does not meet the threshold of bad faith. Nonetheless, I do find that the delayed exchange of the reports is unreasonable conduct that increased the costs of litigation because it one, resulted in a failed “hottub” meeting; two, as per the correspondence between the parties, required considerable effort on the part of the Applicant to obtain the revised reports; and three, resulted in the Applicant and expert having to engage in duplicate work because of the revisions. I find this unreasonable conduct warrants an elevated costs award, and I have accounted for this in determining the overall quantum.

Complexity and Importance to the Parties

[22] While the focused trial was on a single issue, it was very complex involving competing experts, intricate accounting, and the application of different economic valuation models.

[23] The issue was significant to both parties at it was determinative of net family property, the Respondent’s income and the parties’ support obligations.

Rates and Billings

[24] The Applicant’s lead counsel Mr. Augustine is a 41 year call. He charged an hourly rate of $650/hour and billed 128 hours. While the rate is high, it is certainly commensurate with his experience. Junior counsel called to the bar in 2021 charged $300/hr and billed 55.6 hours. Total billings for lead counsel, junior counsel, articling student, and law clerk were 195 hours at a total fee cost of $102,247. Only lead counsel made submissions at the motion hearing.

[25] The Respondent takes issue with the number of counsel involved in the matter. However, I find it was reasonable and appropriate for lead counsel to rely on the work of junior counsel, an articling student (6.7 hours) and a law clerk (5.2 hours) to reduce litigation costs provided that an inordinate amount is not being billed for training of junior counsel. In this regard, I note that the Respondent’s counsel similarly relied on junior counsel, an articling student, and a clerk and billed a total of 217 hours. The Respondent also had two counsel present at the hearing but charged half time for their appearance. Given the complexity of the matter, I find that it was not unreasonable to have junior counsel present to assist at the hearing. Nonetheless, I agree with the Respondent’s counsel that the 10 hours ($3,000) for junior counsel’s attendance at the motion hearing is excessive and have taken this into account in assessing the overall quantum.

[26] Counsel provided a detailed Bill of Costs describing the work performed in reviewing the financial documents and multiple reports, preparing affidavits, financial statements, pleadings and factum, corresponding with opposing counsel, preparing for examination and cross-examination of the experts, and attending for the motion hearing. Given the complexity of the matter and the duplication of work required by the delayed filing of revised reports, I find the billings are reasonable and commensurate with the work performed and necessary in this case.

Expert Fees

[27] The fee for the expert was $31,715 bringing total disbursements inclusive of HST to $31,872.

Conclusion

[28] The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful litigant: Boucher v Public Accountants Council for the Province of Ontario (2004), , 71 O.R. (3d) 291 (C.A.), at para 26.

[29] The Applicant argues that full indemnity costs inclusive of expert fees, disbursements, and HST would be $151,554. Substantial indemnity costs at 80% would be $121,243. A costs award at 70% would be $106,088. The Applicant argues that partial full recovery from October 27, 2023 onward would be $99,196 inclusive of expert fees, disbursements and HST. A partial indemnity costs award at 60% would be $90,932.

[30] Having considered that the Applicant was the successful party, the Applicant’s Offers to Settle warranting full recovery for the period of October 27, 2023 forward, the Respondent’s unreasonable conduct arising from the delayed disclosure warranting an elevated costs award, the complexity of the matter, the billings and rates including some excessive billing for junior counsel’s attendance, I find an elevated costs award fixed at $110,000 is fair and reasonable.

Order

[31] There will be an order that the Respondent pay the Applicant fixed costs in the amount of $110,000 within 30 days.

Somji J. Date: August 21, 2024