Unreasonable Behavior, Bad Faith, and Reasonableness of Costs
Jackson v. Mayerle, 2016 ONSC 1556
This case examined several important aspects of costs determination in Ontario family law cases and provided further insight as to the current interpretation and application of Rules 18 and 24 of the Family Law Rules, which govern costs analysis. However, this case was particularly notable due to the very strong stance Judge Alex Pazaratz, the presiding judge in this matter, took on the issues of reasonableness and the overall quantum of costs incurred by the parties.
Judge Pazaratz expressed his frustration and discontent with the magnitude of financial resources squandered on the parties’ 36-day trial, which he referred to as “needlessly protracted”. He posed the questions “How does this keep happening?” and “What will it take to convince angry parents that nasty and aggressive litigation never turns out well?” Justice Pazaratz stated that courts have an obligation to send a message to unreasonable litigants and, accordingly, his judgment reflected his decision to take a stand on this issue.
The Applicant father and Respondent mother began cohabiting in 1997, were married in 2004, and separated in mid-2011. There was one child of the marriage, who was 8 years old at the time this case was heard.
Following separation, the parties engaged in a high conflict dispute, which finally culminated in a 36-day trial primarily focused on custody of their daughter. During the course of the parties’ dispute, the father spent approximately $300,000.00 on legal fees and the mother spent $200,000.00. The trial was made more expensive and time consuming by the inclusion of expert testimony, lengthy cross examinations of the parties. The parties exchanged several severable offers to settle the matter leading up to trial, however, none of the offers were accepted.
Custody of the parties’ daughter was a primary (and most time consuming) issue at trial as both parties sought sole custody. The 204 page final judgment focused in large part on the issue of custody and specific decision-making control with respect to the child.
The Applicant father was substantially successful overall at trial in that the final result he achieved on most issues was as good as what he had anticipated in his offers to settle and the result surpassed his offers to settle on the key issues, especially with respect to custody. However, the Respondent mother achieved limited success on some of the less time consuming issues at trial.
The Applicant father subsequently sought full recovery of his costs in the amount of $249,512.01.
Judge Pazaratz awarded a fixed amount of $192,000.00 in costs to the Applicant father.
Success and Entitlement to Costs
Judge Pazaratz reiterated many of the rules for costs determination, including the formal requirements of offers to settle that may trigger costs consequences and the requirement that, in order to trigger costs, a party’s end result must be as good as or better than the terms of his or her offer terms. Judge Pazaratz clarified that this also applies to a severable section of an offer even if the judgement is not as good, or better than, the whole offer because the party receiving the offer had the option to accept only the severable portion if he or she did not wish to accept the whole offer. Judge Pazaratz found that the father’s offers were reasonable and they met the requirements to trigger cost consequences. The mother’s offers, on the other hand, did not meet the requirements to trigger cost consequences in her favour even for the issues on which she attained some success.
Under the Family Law Rules because Rule 18(14), the “winner” is, presumptively entitled to full recovery of costs. In this case, the father’s offer set out that he would have sole custody of the child and it proposed a set-off support calculation. Judge Pazaratz found that the father was mostly successful considering the whole case overall and he was also “entirely or mostly successful on the issues which consumed the greatest amount of trial time”. In particular, the final order was more favourable in respect of these two issues and, therefore, the father would be presumptively entitled to full recovery of cost as pertain to said issues.
Unreasonable Behavior and Bad Faith
The mother claimed that the father, though successful, should be deprived of some of his costs due to unreasonable behavior. Rule 24(4) provides for judicial discretion to deny some or all of the successful party’s costs if that party behaved unreasonably. However, As such, Judge Pazaratz found that the father had made consistent attempts to resolve all or parts of the matter and his approach to the main parenting issues (which took up significant trial time and fueled the litigation) was “practical and conciliatory”. Additionally, Judge Pazaratz found the father’s offers to be mostly reasonable.
The mother was found to have behaved unreasonably throughout and leading up to the trial. The following examples of her unreasonable behaviour were found to be relevant to costs:
- The mother unilaterally decided to cut the father out of the daughter’s life despite an established pattern of parenting time sharing which was working for both parties;
- The mother rejected reasonable offers to settle and remained inflexible with respect to the issues throughout the trial;
- The mother’s controlling behavior left the father with no alternative but to resort to court action;
- The mother was relentless in her efforts to marginalize the father;
- The mother ignored the negative impact her uncontrolled emotional issues and manipulations were having on the child and she repeatedly attempted to draw the child into the conflict;
- She made many doubtful allegations with no support for same and she manipulated and fabricated evidence;
- She attempted to introduce improper evidence without notice;
- She engaged in dangerous behavior that would escalate conflict (eg. Stalking the father and driving dangerously);
- The mother refused to get professional psychological or parenting help;
- 10. She failed to present evidence in a clear way and failed to respond to critical evidence presented by father regarding the property issues; and
- 11. She denied modern life reality by insisting that she could not work until the child was 18 years old.
The father suggested that the mother’s actions rose to the level of bad faith, thus triggering full recovery pursuant to Rule 24(8), which permits full recovery and immediate payment in the event that the other party acted in bad faith. Judge Pazaratz explained that a finding of bad faith requires a “high threshold of egregious behaviour” and he reviewed the following comments in the relevant caselaw regarding this issue:
- Bad faith is not the same as bad judgment, negligence, or unreasonable behaviour;
- Bad faith requires the “conscious doing of a wrong”, involving “intentional duplicity, obstruction or obfuscation”;
- Even if a party’s conduct was mostly not in bad faith, there could still be bad faith in specific instances; and
- A perty’s litigation conduct may constitute bad faith where it needlessly increases the cost to the point where it could be anticipated that the other party would suffer financial hardship as a result.
Judge Pazaratz found that most of the mother’s unreasonable behavior did not rise to the level of bad faith, however, her manipulation and falsification of evidence did constitute bad faith. The mother’s unreasonable behavior on its own was sufficient to have costs consequences.
Reasonableness of Costs and Sufficiency of Bill of Costs
Judge Pazaratz reiterated the qualification on costs set out in Rule 18(14), which provides that, despite the above-mentioned triggers for increased costs consequences, there must still be an “overall sense of reasonableness and fairness”. The amount of costs must be fair and reasonable in light of the factors set out in Rule 24(11), including the importance of the issues dealt with, and the complexity or difficulty of issues addressed.
Judge Pazaratz stated that, even where the rules provide for full recovery of costs, this does not entitle the winning party to spend as much as they please without limit. The costs must be proportional to the issues and neither party is permitted to run up costs for the other.
Judge Pazaratz found that the parenting and custody issues were very important in this case and were highly dependent on the complex set of facts that were in dispute. The issues required a high level of skill and persistence from legal counsel. Additionally, the matter was made more complicated by the use of expert witness testimony.
Judge Pazaratz reviewed the requirement set out in Rule 24(11)(c) for the court to consider the costs incurred and assess the reasonableness of the lawyer’s rates and time spent on the case. He examined the sufficiency of the father’s bill of costs so as to determine if the costs outlined therein were justified given the amount of time spent on the case. He was satisfied that the rate of the primary lawyer on the file ($275.00 per hour) and for services of that lawyer’s clerk ($30.00 per hour) were reasonable given the complexity of the matter and required level of expertise. Accordingly, he found the corresponding fees to be reasonable. However, he was concerned with the lack of detail to explain and justify charges for services of several other lawyers and support staff in addition to certain disbursements that were not explained.
With respect to the issue of quantum of costs incurred and how much detail is necessary to justify costs, Judge Pazaratz stated the following:
- The responsibility for failing to take steps to save time in this case (for example, by using live testimony where the evidence would have been conveyed effectively by affidavit evidence, failure to make use of agreed statements of facts or request to admit where appropriate and possible) must be shared by both parties;
- In this case;
- Much of the expense in this case could have been avoided by making use of the above-mentioned evidentiary cost saving measures without impacting the success in the case;
- There is no requirement for an itemized list of tasks completed;
- There is no set standard for information required in a bill of costs to justify the costs therein, however, the higher the costs in a particular case the more information should be detailed to explain the expense;
- The court maintains discretion to determine costs in different amounts regardless of success; and
- “Courts have an obligation to deliver that message, so parents will stop pretending that hard-ball custody litigation is “for the sake of the child.”