Gzechowski v. Percy, 2011 ONCJ 644

Milton Registry No. 27/10 DATE: 11·V·2011 CITATION: Gzechowski v. Percy , 2011 ONCJ 644 ONTARIO COURT OF JUSTICE RE: WENDY SUE GZECHOWSKI - Applicant and ROBERT JAMES PERCY - Respondent BEFORE: Justice Roselyn Zisman ( endorsement ) COUNSEL: Michael A. Nash - for the Applicant John W. Spears - for the Respondent Endorsement inscribed on 11 May 2011 HEARD ON: 29 and 31 March 2011 C O S T S E N D O R S E M E N T 1: INTRODUCTION [ 1 ] The parties settled this motion to change on the day the trial was to commence. The Minutes of Settlement settled all of the issues except costs.

As neither counsel had expected to settle all issues on the day of trial, the issue of costs was adjourned to be argued on March 31, 2011. [ 2 ] Both counsel made oral submissions and filed cost briefs. The Applicant (“mother”) seeks costs on a partial indemnity scale of $33,686.75 or on a substantial indemnity scale of $38,894.25 inclusive of disbursement costs of $ 1,339.23 and applicable GST or HST. It is the position of the Respondent (“father”) that there should be no costs as success was divided and he was always ready and willing to settle the case.

In the alternative, he seeks that the Applicant pays his costs. The Respondent seeks costs on a partial indemnity basis of $9,940.47 or on a full indemnity basis of $14,592.6800 inclusive of disbursement costs of $383.88 and applicable GST or HST. [ 3 ] In order to put the costs submissions into context it is necessary to briefly review the background of the parties and of these proceedings.

2: BACKGROUND [ 4 ] The parties were married on May 27, 1989 and separated after 11 years of marriage on October 8, 2000. At the time of separation the mother was 39 years old and the father was 36 years old. There are two children of the marriage, Brooke Rebecca Percy born November 6, 1991 and Laura Colby Percy born October 18, 1994. [ 5 ] The parties entered into a Separation Agreement dated April 18, 2001. The agreement provided, inter alia , for joint custody of the children with primary residence with the mother, and child and spousal support.

Both parties were required to provide to each other, without request, a copy of his or her tax return and Notice of Assessment. [ 6 ] The parties entered into an Amending Separation Agreement dated August 7, 2008 as a result of a material change in circumstances due to the change in each party’s income, the pattern of shared parenting, the standards of living in the two homes and the pattern of informal expense sharing.

It was agreed that there be a reduction of 30% from the basic amount of child support the father would otherwise be required to pay. [ 7 ] The parties acknowledged that the father’s income increased to $119,000.00 as of August 1, 2007, to $133,214.00 as of February 1, 2008 and due to a promotion to $146,000.00 as of April 21, 2008.

The mother’s income was acknowledged to be $53,045.00 as of January 1, 2008. [ 8 ] It was agreed that the father would pay child support of $1,345.00 per month as of May 1, 2008 and that this amount would be automatically increased after the effective date of his raise to an amount of child support that was 70% of the Federal Child Support Guidelines. The parties were to advise each other immediately after any changes in his or her level of income.

The agreement also stipulated that each child was expected to contribute a reasonable proportion of any summer earnings towards the cost of her post- secondary education and the amount to be shared by the parties was net of this contribution. [ 9 ] The agreement also provided that the father pay the mother spousal support of $265.00 per month as of September 1, 2007 to terminate forever on December 31, 2016 unless it was terminated before that date, as a result of the mother’s remarriage or co-habitation with another person for a period of more than one year. [ 10 ] All other provisions of the Separation Agreement not varied by the Amending Agreement continued in full force and effect. [ 11 ] At the end of July 2009, the shared parenting arrangement ceased as both Brooke and Laura stopped sleeping over at the father’s home. [ 12 ] On September 1, 2009, Brooke began university at McMaster University and therefore no longer lived at home. [ 13 ] As of September 1, 2009, the father unilaterally reduced his child support payments as a result of Brooke attending university.

He reduced child support to $857.00 per month, being 70% of the child support for one child in accordance with the Federal Child Support Guidelines .

He continued to pay spousal support of $265.00 per month. [ 14 ] The mother sent several emails to the father advising that the she did not agree with the amount of the reduction, that any change needed to be discussed and any arrangement reduced to writing and formalized and that the father should continue to pay the amount of child support in the separation agreement. 3: COURT PROCEEDINGS [ 15 ] As a result of this dispute about child support, the mother filed the Amending Separation Agreement with the court for enforcement on January 26, 2010 and at the same time brought a Motion to Change child support. [ 16 ] As a result of the litigation, the father was required to provide financial disclosure.

The father’s financial statement sworn February 18, 2010 disclosed his income to be $144,023.00.

However, based on the Notices of Assessment filed, the father’s income was disclosed to be $162,717.00 for 2008 and $180,414.00 in 2009. [ 17 ] The mother took the position that the father had not provided full disclosure when the Amending Separation Agreement was negotiated and that if she had known that his income for 2008 was $162,717.00 and not $144,023.00 she would not have agreed to spousal support of $265.00 per month to end December 31, 2016 nor would she have forgiven the spousal support arrears that were owing at that time. [ 18 ] The Motion to Change only sought a change to the amount of child support and for payment of the child support arrears.

However, as a result of the father’s financial disclosure the mother became aware of the increase in the father’s income and sought to also deal with the issue of a change in spousal support. At the case conference on June 11, 2010 before Justice Wolder, the case management judge, the endorsement states that Justice Wolder would entertain leave to amend the Motion to Change to seek this broader relief. [ 19 ] A settlement conference was held on September 27, 2010.

Justice Wolder’s endorsement states that the parties agreed that the trial would include the issues of spousal support that had been raised by the mother and that had been included in the case conference and settlement discussions in order to expedite the resolution of both the changes to child support and spousal support as set out in the Separation Agreement and the Amending Separation Agreement. [ 20 ] At the trial management conference before me, it was agreed that both counsel were permitted to file further materials regarding spousal support. [ 21 ] Prior to the commencement of the trial on March 29, 2011, counsel requested that the matter be held down as counsel were of the view that they could resolve some of the issues and narrow the trial.

After lengthy negotiations, counsel were able to resolve all of the

issues except for costs. 4: ANALYSIS [ 22 ] I adopt the reasoning of Justice Taylor in O’Brien v. O’Brien 2009 CarswellOnt 7194 (Ont. S.C.J.) wherein he held that in considering the issue of costs in the context of a case that has settled, the most important factor in determining both entitlement and quantum of costs is the reasonableness and timeliness of the parties’ respective offers to settle.

It is not appropriate to go behind the freely negotiated terms of settlement and engage in an exercise of determining which party’s position on each issue would have been accepted by the trial judge if the matter had proceeded to trial and that the reasonableness of the conduct of the parties in a consideration but not the most important one. 4.1: Comparison of Offers to Settle [ 23 ] I have considered both the offers to settle and also the informal offers in correspondence between counsel. [ 24 ] The father’s counsel made the first offer in correspondence dated March 5, 2010 in an effort to settle prior to the first court appearance date of March 22, 2010.

He acknowledged that the father’s income had increased to $156,000.00 and an increase in child support was appropriate. He proposed a modest amount of $150.00 per month for Brooke, who was away at university, rather than the $350.00 per month that the mother had requested and proposed a compromise on the date that the children’s residence arrangements changed. He also proposed that Brooke be deemed to contribute 75% of her summer earnings to the cost of there be a formula with r her university.

This issue was not addressed in the mother’s Motion to Change, was a change to the terms of the Amended Separation Agreement that just required a reasonable contribution and was also not referred to in the father’s Response to the Motion to Change nor was this claim made elsewhere in his pleadings. [ 25 ] Subsequent to the father’s 2007 to 2009 income being disclosed, the mother made separate offers to settle both child and spousal support on September 16, 2010. With respect to child support, she proposed $332.00 per month for Brooke, $1,414.00 per month for Laura, $12,500.00 for arrears and costs to be spoken.

The amount of support for Brooke was based on a reduction of 60% from the basic guideline support in view of her living away from home while attending university. With respect to spousal support, she proposed either that the father pay $900.00 per month to December 31, 2016 or a lump sum of $20,000.00.

In both offers, costs were to be spoken to. [ 26 ] In correspondence dated September 28 and October 5, 2010, the father proposed to settle all issues on the basis of a lump sum payment namely, $20,000.00 for spousal support with a release to any further claims and a lump sum of $60,000.00 for child support based on the assumption that Laura had two remaining years of high school and both children would complete four years in post- secondary education and live away from home. The father would still be responsible for his share of the university costs.

No costs would be payable by either party. [ 27 ] The mother then submitted further separate offers to settle on November 9, 2010. With respect to child support she proposed either a lump sum of $80,000.00 or $279.00 per month for Brooke, $1,431.00 per month for Laura and $12,500.00 in arrears. With respect to spousal support, she proposed either $600.00 per month to December 31, 2016 or a lump sum of $20,000.00. In all offers, costs were to be spoken to. [ 28 ] The father then submitted two alternate offers to settle child support on November 18, 2010.

He proposed to pay $279.00 per month for Brooke, $1,431.00 per month for Laura or in the alternative, a lump sum of $63,476.00 for child support. In both offers he proposed that the children contribute 70% of earnings to post-secondary expenses, the parties share the remaining expenses 1/3 to the mother and 2/3 to the father, $7,5000.00 for arrears and that there be no costs.

On November 18, 2010, he proposed to settle spousal support with a lump sum of $20,000.00 with no costs. [ 29 ] The mother made a further offer to settle child support on 7 March 2011, she proposed $335.00 per month for Brooke, $1,428.00 per month for Laura and costs to be spoken to. The issue of support arrears had been resolved as the father on his own initiative on February 27, 2011 deposited $16,019.00 in the mother’s bank account. [ 30 ] The parties settled the issue of child support based on the 2010 income of the mother being $60,713.00 and of the father being $173, 546.00.

It was agreed that the father pay child support of $310.00 per month for Brooke and $1,428.00 per month for Laura. This was based on full child support guideline support for Laura and a reduction of 63% from the basic guideline support for Brooke who was living away from home while attending university and the same formula to apply when Laura attended university if she also lived away from home.

Costs were to be spoken to. [ 31 ] The parties settled the issue of spousal support on the basis of a $20,000.00 lump sum with costs to be spoken to. [ 32 ] The parties settled on the father paying a total of $1,738.00 per month in child support, this is only $8.00 better than the mother’s offer to settle dated September 16, 2010 of $1,746.00 per month, $18.00 per month worse than the offer of November 9, 2010 of $1,710.00 per month and $25.00 per month better than the offer of March 7, 2011 of $1,763.00 per month.

By contrast, the father’s initial offer, in his counsel’s correspondence dated March 5, 2010 was for a total child support payment of $1,564.00 per month and in his offer to settle dated November 18, 2010 the amount offered was $1,564.00 per month. Both of these offers also included formulas for the contribution by the parties and the children to the cost of post-secondary expenses. [ 33 ] With respect to the arrears, the parties settled on $16, 019.00.

If the father had accepted the mother’s offer to settle arrears at $12,500.00 in either the September 16 or November 9, 2010 offers to settle he would have saved respectively either $2,470.20 or $2,889.72. [ 34 ] With respect to the spousal support, the offer to settle for $20,000.00 was made both on the September 16 and November 9, 2010. The only issue in contention was the issue of costs.

[35] In my opinion the mother made early, consistent and reasonable offers to settle which were extremely close to the terms of thefinal settlement. I reject the father’s submission that success was divided. The most contentious issue that impeded settlement was thefather’s insistence that there be no costs. In the final settlement, it was agreed that costs would be determined by the court and this hasconsistently been the mother’s position.

The father’s proposal for lump sum child support and his proposal for fixing a formula for theparties’ and the children’s contributions to the post-secondary expenses increased the legal costs of the mother and were not part of thesettlement negotiated by the parties. 5: GENERAL PRINCIPLES [36] Rule 24 (1) sets out the basic assumption that a successful party is entitled to costs. Rule 23 (11) provides a further list offactors a court should consider in dealing with costs: A person setting the amount of costs shall consider,

a) the importance, complexity or difficulty of the issues;

b) the reasonableness or unreasonableness of each party’s behavior in the case;

c) the lawyer’s rates;

d) the time properly spent on the case, including conversations between the lawyer and the party, drafting documentsand correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;

e) expenses properly paid or payable; and

f) any other relevant matter. [37] In Serra v. Serra 2009 ONCA 395 , [2009] O.J. No. 1905 at para. 8, the Ontario Court of Appeal confirmed that costsrules are designed to foster three important principles: 1. to partially indemnify successful litigants for the cost of litigation; 2. to encourage settlement; and 3. to discourage and sanction inappropriate behavior by litigants. [38] The court’s role in assessing costs is not necessarily to reimburse a litigant for every dollar spent on legal fees. As was pointedout in Boucher v. Public Council (Ontario) (2004), (ON CA), 2004 CarswellOnt 2521, [2004] O.J.

No. 2634, theaward of costs must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceedings. [39] In this case, I have considered the legal principles and factors in subrule 24 (1). In determining this amount I have considered thefollowing factors to be applicable to this case. 5.1: Importance, Complexity or Difficulty of the Issues [40] To both parties fixing the appropriate amount of child support and spousal support was important.

The father sought somefinality and certainty and the mother wished to ensure that she was obtaining the correct amount of spousal and child support based onthe father’s accurate income. [41] The issues were not complex, except to the extent that the case law provides little assistance or guidance as to howto calculate the appropriate reduction of child support pursuant to section 3(2) (

b) of the Federal Child Support Guidelines. 5.2: Reasonableness or Unreasonableness of Each Party’s Behaviour [42] The father’s unilateral reduction of child support as set out in the Amended Separation Agreement made this litigationinevitable. Prior to commencing this proceeding, the mother indicated that she was prepared to discuss and negotiate a settlement butpending an agreement she rightly insisted that the father continue to make the stipulated support payments.

If the father had agreed tomake the required payments, there was a strong likelihood that the litigation would not have been necessary as the parties had beensuccessful in negotiating their Separation Agreement and an Amended Separation Agreement. Although the father did pay the supportarrears prior to the commencement of the trial, this was only done about a month before the trial was to commence and by then a greatdeal of the legal costs had already been incurred. [43] It was Mr. Nash’s position that the father acted unreasonably in not disclosing the significant increase in his employmentincome.

The Separation Agreement, dated April 18, 1991, required that both parties provide to each other, without request, annualdisclosure of his or her income tax returns and Notices of Assessment. Neither party provided any such disclosure. The AmendedSeparation Agreement, dated August 7, 2008, stipulated that the father’s income had increased to $119,000.00 as of August 1, 2007,increased to $133,214.00 as of February 1, 2008 and effective April 21, 2008 would be increasing to $146,000.00 as a result of hispromotion.

The agreement also required each party to immediately notify the other in writing of any changes to his or her income. Neither party complied with this requirement. However, Mr. Nash submitted that the father is more blameworthy as the mother had notrequested any change to the provisions relating to the special or extraordinary expenses and therefore her income was not relevant. Further, upon disclosure, it was revealed that the father’s income, at the time of negotiating the Amended Separation Agreement had

been$162,718.64 in 2008 and $180,414.86 in 2009. As neither party complied with the disclosure provisions, I do not attach more blame to one party than the other. However, even after the litigation began, there were some difficulties in obtaining accurate information about the father’s income and this did cause further legal costs to be incurred by the mother. [ 44 ] I reject Mr. Spears’ submission that the mother acted unreasonably and impeded the negotiations by not being in the same room as the father during a four-way meeting. I agree with Mr.

Nash that counsel should be entrusted to know if the presence of the parties in the same room will help or hinder negotiations. I find that conducting a four-way meeting in this case by “shuttle” did not in any way impede the ability to settle. 5.3: Time Properly Spent on Case, Lawyer’s Rates and Expenses [ 45 ] The time spent for preparing the trial was reasonable.

As costs were reserved for the case and settlement conferences, I have also reviewed these costs and the other costs that are not otherwise attributable to any steps in the proceeding such as preparation of the pleadings, financial statements, preparation of offers to settle, interviews, correspondence. In addition to the conferences required by the court process, counsel arranged for two additional meetings to explore the prospects of settlement. [ 46 ] It is submitted by Mr. Spears, father’s counsel, that compared to his Bill of Costs, Mr.

Nash spent considerably more time, or by implication too much time on this case. It is not for the court to second guess the amount of preparation or time counsel should spend on a case. Mr. Nash prepared a very detailed and precise Bill of Costs and I find that the costs claimed and documented are reasonable. [ 47 ] Mr, Nash was called to the Bar in 1977 and has 34 years of experience. His actual hourly rate of $325.00 or $275.00 on a partial indemnify basis is reasonable.

The expenses for the disbursements are reasonable. 5.4: Other Relevant Considerations [ 48 ] The father’s injected legal issues that were not subject to the litigation and thereby decreased the prospects of settlement and increased the legal costs. Despite the fact the neither the Motion to Change or the Response to Motion to Change raised the issues of special and extraordinary expenses, the father took the position that the parties should establish rules about the proportionate sharing of expenses by the parties and the children. The father also continued to insist that there be no costs.

Even when the parties were essentially in agreement on all issues, the father continued to tie any settlement to the issue of the mother abandoning her position that costs be spoken to. If the father had accepted any of the offers earlier, costs, in any, would have been considerably less.

It was only when the father abandoned the issue of the special and extraordinary expenses and was prepared to allow costs to be spoken to that the litigation settled. 6: CONCLUSION [ 49 ] Based on these factors and in determining an amount that is fair and reasonable, I am fixing costs at $30,000.00 all inclusive payable by the Respondent to the Applicant within 60 days. 11 May 2011 Justice Roselyn Zisman