Cost Awards in BC

“Costs” refers to the cost of litigating a dispute in court. In British Columbia, under rule 16-1 (7) of the Supreme Court Family Rules, the Supreme Court has authority to make one party pay the other party’s costs. The lion’s share of a costs award tends to be legal fees, but these awards also include disbursements such as expert reports.

The specter of costs is designed to encourage parties to take reasonable positions and settle their disputes out of court. Mr. Justice Greyell recently issued a decision, S.D.H. v. T.H. 2016 BCSC 780, which reminds us of the test for cost awards in the Supreme Court of British Columbia.

Per rule 16-1 (7), costs must be awarded to the successful party unless the court orders otherwise. The issue thus turns on the meaning of “success”. Determination of “success” involves the four step analysis laid down by Mr. Justice Bouck in Fotheringham v. Fotheringham, 2001 BCSC 1321:

  1. Focus on the matters in dispute at trial which may or may not include issues explicitly mentioned in the pleadings;
  1. Assess the weight or importance of those matters to the parties;
  1. Conduct a global determination with respect to the matters in issue and determine which party substantially succeeded overall;
  1. If one party substantially succeeded, consider whether there are reasons to deprive the winning party of costs.

The Court of Appeal approved this test in Marquez v. Zapiola, 2014 BCCA 35.

BC family lawyers need to be aware of this test in order to effectively advise clients; while there are few things better than obtaining costs, there are few worse than being assessed for costs.

Jeffrey L. Hartman

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Certificates of Pending Litigation in BC

Drein v. Puleoi, 2016 BCSC 593 is a civil case about cancelling a certificate of pending litigation (CPL). A CPL is a charge on title alerting potential buyers that the property is subject to a legal dispute. CPLs are used with great frequency in family law and thus it is helpful to review Drein v. Puleoi.

The Plaintiff sold ½ interest in her home to the Defendant. The parties lived in separate units for many years. The Defendants obtained an order for partition and sale of the property. The Plaintiff registered a CPL because she had sunk about $75,000.00 into the Defendants’ unit for bylaw compliance. She was amenable to removing the CPL if the disputed amount was paid into trust from the proceeds of sale to await the determination of the dispute. The Defendants brought an application to cancel the CPL.

The Defendants succeeded because the Plaintiff’s CPL existed to protect a monetary interest. Pursuant to section 215 (1) (a) of the Land Title Act, R.S.B.C. 1996, c. 250, CPLs can only protect an interest in land. Mr. Justice Macintosh found that the Plaintiff’s CPL had the effect of providing a pre-trial enforcement of her monetary claim before she established her case. He noted that CPLs “are designed to preserve land claims pre-trial by preventing the land from passing to innocent third parties…thereby undermining the claim.”

Drein v. Puleoi is a must read for BC family lawyers because it is essential to have a sense of when and why to register a CPL.

Jeffrey L. Hartman

Cost Basics in Ontario

Motions for costs arise with extraordinary frequency in Ontario, so it is helpful to revisit some basic concepts as illustrated by Brock v. Sorger, 2016 ONSC 1498.

Costs serve three main purposes: to indemnify successful litigants, to encourage settlement, and to sanction unreasonable behaviour by litigants (Fong v. Chan (1999), 46 O.R. (3d) 330, at para 22).

Cost awards should reflect what the Court deems to be a fair and reasonable amount that should be paid by the unsuccessful party (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 at para 24). The actual amount incurred by the successful litigant is of course relevant, but not determinative (Delellis v. Delellis, 2005 CanLII 36447 (Ont. S.C.).

Determining who was successful is not always a straight forward task. Some issues are, not surprisingly, more significant than others (Brennan v. Brennan, 2002 CanLII 2742, at para 3 (Ont. S.C.).

Rule 24(11) of the Family Law Rules establishes factors the court considers in determining costs, including: the importance, complexity, or difficulty of the issues; each parties’ behaviour; the lawyers’ rates; the lawyers’ preparation; expenses paid and so on.

Offers to settle impact cost determinations. Under Rule 18, if a party does as well or better than an offer they made, they are entitled to full recovery effective the date of the offer if it is not accepted by the other side.

In strategizing, counsel should plan very carefully to obtain the most favourable cost consequences for clients.

Varying Imputed Income in Ontario

Imputing income for support is an issue that arises time and again in my practice so I pay close attention to new case law on the matter.

Ruffolo v. David, 2016 ONSC 754 is one such case. The father’s income was imputed at trial. He later brought a motion to vary support and presented new evidence (tax returns, notices of assessment, and an accountants’ report) that was not available at trial but obviously should have been. The motions court found a material change in circumstances and reduced his support obligations. Consequently, the mother owed the father some $80,000.00 in overpayments and appealed the motion court’s decision.

The appeal was allowed. The father failed to establish a material change in circumstances. Trang v. Trang (2013) 29 R.F.L. (7th) 364 (Ont. S.C.J.) was cited. It provides that a party seeking to vary an imputed income faces a difficult burden. They must show the factors considered when income was imputed and whether those factors have changed; it is not enough simply to present evidence of a declared income. Otherwise this would benefit the payor at the recipient’s expense, as the payor could wait and see whether income was imputed and, if so, re-litigate the issue using their declared income. The onus should not fall on the recipient to show why income should still be imputed.

The payor must address why income had to be imputed in the first place. They must show a change in circumstances establishing either: (a) it is no longer necessary or appropriate to impute income and their representations should now be accepted, or (b) even if income should still be imputed, a change in circumstances results in the imputation of a different amount.

The Court comments on the meaning of a material change. A material change likely exists where, if the facts were known at the time of the initial order, a different result would have followed. Willick v. Willick, [1994] 3 S.C.R. 670 was cited for the principle that if the matter relied on as constituting the material change was known when the initial order was made, it cannot be relied upon as a basis for variation.

The main take away point from Ruffolo is this: tell your clients to prepare their financial statements right the first time.

Obtaining Leave to Appeal from an Interim Order

The recent case of Reddy v. Reddy, 2016 ONSC 807 deals with a motion for leave to appeal from an interim order granting a variety of relief. This article focuses on the appeal process.

Ontario’s Family Law Rules do not specify an appeal process, so we must turn to the Rules of Civil Procedure. Rule 62.02 governs appeals from an interim order made by a judge.

The test is found in Rule 62.02 (4) (a) and (b). According to Reddy, leave should not be easily granted and the test is very strict. The rule states that leave shall not be granted unless one of two circumstances exist.

Leave may be granted under (a) where there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted. The Court in Reddy stated that the conflict must regard a matter of principle, not simply a situation where a different result is reached.

Leave may also be granted under (b) where there appears to the judge hearing the motion good reason to doubt the correctness of the order and the proposed appeal involves matters of such importance that leave should be granted. The Reddy Court explains that leave may be granted where the correctness of the decision is open to vary serious debate. Further, the judge granting leave need not believe that the decision is actually wrong. The Court lastly reminds that the matter must touch upon the broader interests of law and the administration of justice.

Are Cash Gifts Income? Sometimes

Do cash gifts qualify as income for support in BC family law? Under the right circumstances, according to Justice Ross’s judgment in Todd v. Todd, 2016 BCSC 243.

The parties in this case led relatively aimless professional lives and relied primarily on cash and other gifts from Mr. Todd’s mother to fund their comfortable lifestyle. The question on the support analysis was whether these gifts qualified as income.

Justice Ross started with section 19 of the Guidelines which allows the Court to impute income under certain circumstances. She notes that the general policy of the Guidelines is to base child support upon money reasonably available to the payor. Although section 19 does not specifically reference gifts, the matter was addressed by the Ontario Court of Appeal in Bak v. Dobell, 2007 ONCA 304 (CanLII).

In Bak, the Ontario Court of Appeal reasoned that although the Legislature excluded gifts from section 19, that provision allows for income imputation so as to correct underemployment or anomalous income tax treatment. Therefore, gifts can serve as the basis for income imputation, and the legal analysis must focus on:

  • The regularity of the gifts;
  • The duration of the gifts;
  • Whether the gifts were part of the family’s income during cohabitation that entrenched a particular lifestyle;
  • The circumstances of the gifts that earmark them as exceptional;
  • Whether the gifts do more than provide a basic standard of living;
  • The income generated by the gifts in proportion to the payor’s entire income;
  • Whether they are paid to support an adult child through a crisis or period of disability;
  • Whether the gifts are likely to continue; and
  • The true purpose and nature of the gifts.

An assessment of these factors led the Bak Court to conclude that the gifts in question could not serve as a basis for imputing income.

Bak was adopted into BC law by the Court of Appeal in Nielsen v. Nielsen, 2007 BCSC 604 (CanLII), Johnson v. Johnson, 2011 BCCA 190 (CanLII), and S.R. v. B.E., 2011 BCSC 1589 (CanLII).

Ultimately, Justice Ross declined to impute income on the basis of gifts from Ms. Todd. The gifts were not trust income or wages in disguise. Ms. Todd was under no obligation to provide support, and did so out of generosity. Also, her ability to provide further gifts was doubtful.

Todd is an important case because it gives BC and Ontario family lawyers another arrow in their quiver of tools for imputing income.