McGrail v. McGrail

2016 BCSC 583 McGrail v. McGrail IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: McGrail v. McGrail, 2016 BCSC 583 Date: 20160405 Docket: E132298 Registry: Vancouver Between: Ann Elizabeth McGrail Claimant And Anthony Emmett McGrail 1st Respondent And Wanda Marie Sens 2nd Respondent Before: The Honourable Mr. Justice Verhoeven Reasons for Judgment re Costs Counsel for Claimant: M. Campbell Counsel for 1st Respondent: J.A.W. Schuman, Q.C. and S. Stanislaus, Articled Student Counsel for 2nd Respondent: R.W. Howarth Place and Dates of Hearing: New Westminster, B.C. March 21, 2016 Place and Date of Judgment: Vancouver, B.C. April 5, 2016 I. Introduction [1] This decision relates to costs of these proceedings. [2] I issued reasons for judgment in this matter January 25, 2016. The reasons are indexed at 2016 BCSC 104. As requested by the parties, I deferred the issue of costs. The parties made extensive submissions with respect to costs March 21, 2016. II. Positions of the Parties [3] Mrs. McGrail contends that she was substantially successful and should be awarded costs against Mr. McGrail. She seeks special costs, or "increased costs". She contends that Mr. McGrail and Ms. Sens should be jointly and severally liable for any order for costs. [4] She also seeks a specific direction that the costs of an accountant's report be recoverable as costs, notwithstanding that the report was not admitted into evidence as an expert's report. Nonetheless, the tables prepared by the accountant were in evidence and were used as part of counsel's submissions, as I mentioned in para. 71 of the reasons. [5] Mr. McGrail contends that the McGrails had mixed success at trial, thus these parties should bear their own costs. He contends, in the alternative, that even if Mrs. McGrail is found to have been substantially successful, Mr. McGrail should not be required to pay costs, pursuant to Rule 16-1(7) of the Supreme Court Family Rules, B.C. Reg. 169/2009 "unless the court otherwise orders." [6] Ms. Sens contends that she should be awarded special costs against Mrs. McGrail. Mrs. McGrail contends that Ms. Sens should be denied costs. III. ANALYSIS [7] The court has a wide discretion with respect to costs. The discretion must be exercised judicially, in accordance with general legal principles pertaining to the law of costs, and based upon conduct related to the litigation: Oasis Hotel Ltd. v. Zurich Insurance Co. (1981), 124 D.L.R. (3d) 455, 28 B.C.L.R. 230 (C.A.); R.L.L. v. R.L., 2001 BCCA 386. A. Costs as Between Mrs. McGrail and Mr. McGrail [8] The first issue to be decided is whether Mrs. McGrail achieved substantial success against Mr. McGrail, within the meaning of the authorities pertaining to Rule 16-1(7). [9] I adopt the convenient summary of the law regarding the interpretation of Rule 16-1(7) set out in the decision of Pearlman J. in MacLean v. Mio, 2011 BCSC 148 at paras. 17 to 31: Success in the litigation 17 Rule 16-1(7) of the Supreme Court Family Rules provides: Subject to subrule (9), costs of a family law case must be awarded to the successful party unless the court otherwise orders. 18 In family law proceedings, Rule 16-1(7) replaced Rule 57(9) of the former Supreme Court Rules, which provided: Subject to subrule (12), costs of an incidental to a proceeding shall follow the event unless the court otherwise orders. 19 Under the former Rule 57(9), costs normally followed the event, and went to the party who enjoyed "substantial success": Gold v. Gold, 82 B.C.L.R. (2d) 180, 32 B.C.A.C. 287. 20 The respondent suggests that the omission from Rule 16-1(7) of reference to costs following the event means that the determination of which party is "successful" in family law cases may no longer require an analysis of which party was "substantially successful" in the event. The respondent has not proposed an alternative test that would apply to a family law case involving multiple issues or matters in dispute. 21 Rule 14-1(9) of the Supreme Court Civil Rules provides that: Subject to subrule (12), costs of the proceeding must be awarded to the successful party unless the court otherwise orders. 22 Rule 16-1(7) of the Supreme Court Family Rules and Rule 14-1(9) of the Supreme Court Civil Rules both state the same principle: the successful party must be awarded costs unless the court otherwise orders. 23 In both family law cases and civil proceedings, the court's discretion to order otherwise must be exercised judicially: Gold v. Gold, at para. 19. 24 In Aschenbrenner v. Yahemech, 2010 BCSC 1541, Mr. Justice Metzger in awarding costs under Rule 14-1(9) applied the law as developed under the former Rule 57(9). Referring to Rule 14-1(9), Metzger J. at para. 13 said this: While the Rule itself does not include the term "substantial success" under the former Rule 57(9), it was held to be a necessary and sufficient condition for an award of costs under Rule 57(9) that success in the outcome of the trial be "substantial": see Gold v. Gold, 82 B.C.L.R. (2d) 180, 32 B.C.A.C. 287. 25 In Aschenbrenner, Metzger J. in determining whether to award costs to the successful party, applied the four part test stated by Bouck J. in Fotheringham v. Fotheringham, 2001 BCSC 1321 at para. 46: First, by focusing on the "matters in dispute" at trial. These may or may not include "issues" explicitly mentioned in the pleadings. Second, by assessing the weight or importance of those "matters" to the parties. Third, by doing a global determination with respect to all the matters in dispute and determining which party "substantially succeeded," overall and therefore won the event. Fourth, where one party "substantially succeeded," a consideration of whether there are reasons to "otherwise order" that the winning party be deprived of his or her costs and each side then bear their own costs. 26 Other recent decisions of this court which have applied the substantial success test include Chen v. Beltran, 2011 BCSC 41, at paras. 9 and 10, an award of costs under Rule 14-1(9) of the Supreme Court Civil Rules, and B.K.A. v. D.M.A., 2011 BCSC 17, at paras. 33-35, an award of costs under Rule 16-1(7) of the Supreme Court Family Rules. 27 Cases decided under the former Rule 57(9) established that the principles governing the award of costs in family law proceedings are the same as those applicable to other civil litigation: Gold v. Gold (1993), 82 B.C.L.R. (2d) 180 (C.A.) at para. 19; Karpodinis v. Kantas, 2006 BCCA 400 at para. 4. 29 Rule 14 -1(9) of the Supreme Court Civil Rules and Rule 16-1 (7) of the Supreme Court Family Rules state an identical test for the award of costs. I conclude that the principles applicable to the award of costs in a family law case remain the same as those applicable in other civil proceedings. 30 Following the reasons for judgment of Metzger J. in Aschenbrenner, I also conclude that in determining which party is "successful" under Rule 16-1(7), the court must still consider, in a case involving multiple issues, whether one party has been "substantially successful". That requires an objective comparison of the relief granted and results obtained by the parties with the submissions made at trial: Fotheringham, at paras. 28, 60; Rattenbury v. Rattenbury, 2001 BCSC 593 at paras. 20, 21. 31 In Fotheringham, at para. 45, Bouck J. described substantial success as 75 percent or better, to be determined by the trial judge looking at the disputed matters globally, and weighing their relative importance to the parties. [10] The major "matters in dispute" at trial were as follows: 1. In relation to the division of property: a) Mrs. McGrail's claim that certain assets were family property based upon her contention that the date of separation was January 2012, whereas Mr. McGrail contended that the date of separation was December 2008. The assets in dispute based upon this issue were: (1) The interests of Mr. McGrail in the New Zealand properties and the Nickyboy Trust; (2) The Ford pickup truck in New Zealand; (3) The bank accounts and investments that Mr. McGrail held jointly with Ms. Sens; and, (4) The fifth wheel trailer purchased by Mr. McGrail in Saskatchewan in 2011 (trading in an earlier one he bought in 2007). b) Mrs. McGrail's claim for compensation under the Family Law Act, S.B.C. 2011, c. 25, s. 97(2)(c) for the above family property alleged to have been diverted, or for a compensating equalization payment; c) Mrs. McGrail's claim for re-apportionment, which would allow her to keep the Chilliwack matrimonial home, subject to the mortgage; d) Mrs. McGrail's claim against the Saskatchewan duplex property in the name of Ms. Sens; e) Mrs. McGrail's claim for retroactive spousal support; f) Mr. McGrail's claim for cancellation of the arrears of spousal support of $26,548; g) Mr. McGrail's claim for $47,000 as one half of the value of the Wayne Gretzky sports card, or for an order that she produce the card; and, h) Mr. McGrail's claim for other personal possessions. [11] In their submissions at trial the parties both sought equal division of their respective pensions. (para. 69 of the reasons). Mrs. McGrail did not seek ongoing periodic spousal support. [12] In my view, success was roughly equally divided as between Mrs. McGrail and Mr. McGrail. [13] A major issue at trial was the date of separation. While the date of separation was determined to be September 1, 2010, thus somewhere between the dates contended for by the McGrails, in practical terms this decision meant that much of the property in dispute was after acquired by Mr. McGrail and was not family property to be divided, nor could there be an equalization payment in respect of it. This applies to the New Zealand properties and trust as well as the joint investments, bank accounts, pickup truck and the second trailer. At trial, Mrs. McGrail submitted that the joint accounts and investments totalled about $26,000. Mr. McGrail and Ms. Sens testified that the truck was worthless once it was transported to New Zealand. The second trailer was contended to be worth $50,000, not much greater than the 2010 value of $45,000 for the first trailer in 2010 before that one was traded in for the second trailer; therefore the most valuable asset in this group is the trust asset. As I noted (para. 64), Mr. McGrail placed a value of the entire interest in the trust at $211,703 (CAD), allegedly jointly owned. Thus these assets retained by Mr. McGrail exclusively were worth in excess of $100,000, even assuming only a 50% interest on his part. [14] Mrs. McGrail did not succeed in establishing an interest in the Saskatchewan duplex property. This was also a major issue at trial. [15] She succeeded in retaining the Chilliwack home. Of the family property total of $329,000, she succeeded in obtaining reapportionment in her favour to the extent of about 68% of the assets ($224,000) versus about 32% for Mr. McGrail ($105,000), an advantage of $59,500 to her. [16] Mrs. McGrail obtained an order for retroactive spousal support of $100,000. As I noted, the award could well have been much higher were it not for Mr. McGrail's personal and financial circumstances (para. 108). I held that he was at fault for putting himself into a poor financial position despite his recent large earnings. However, the reality of the present situation had to be borne in mind. [17] In relation to this, the earlier date of separation worked to the advantage of Mrs. McGrail. [18] The matters of unequal division, particularly of the home, and of a substantial payment to Mrs. McGrail for compensation, or (as I held) for retroactive spousal support, were also major issues at trial. [19] I note that in his costs submissions, Mr. McGrail argues that he did not have notice of the claim for retroactive spousal support in the pleadings, and the matter was not raised at trial until the very end of Mrs. McGrail's closing submissions. I do not accept this submission. The Notice of Family Claim filed August 8, 2013 sought spousal support of $6,526 per month, well in excess of the amounts that Mr. McGrail had been paying to Mrs. McGrail since his alleged date of separation in December 2008 and the date of separation as found of September 1, 2010. The interim order of Master Baker made November 18, 2013 provided for spousal support payments of $6,000 per month, commencing November 1, 2013. This was of course only an interim order. Mr. McGrail cannot argue that his liability for retroactive spousal support came as a surprise. [20] Mrs. McGrail was successful in relation to the arrears of spousal support of $26,548. The matter of the Wayne Gretzky card took up a large and inordinate amount of trial time. She succeeded. She also succeeded with respect to the other personal possessions issue. [21] In the result, as between Mrs. McGrail and Mr. McGrail, success was divided and there will be no order for costs to either party. That conclusion extends to the present costs application, which was in practical terms a continuation of the trial submissions. B. Costs as Between Wanda Sens and Mrs. McGrail [22] Ms. Sens was successful in defeating the claims against her properties. While I was sceptical about the funding for the (investment) duplex purchase, Mrs. McGrail could not prove the claim and did not press it in final submissions. The claim against Ms. Sens' own residence was abandoned at the outset of trial. [23] Ms. Sens should be denied costs of the action. The following is relevant: a) The first financial statement she swore June 6, 2014 was incomplete and misleading. She was required to complete part three of the form (as the form directs). She listed only the Saskatchewan properties but no other assets, and in particular did not refer to the New Zealand assets or joint bank accounts and investment account with Mr. McGrail (para. 91); b) Her second financial statement sworn November 25, 2015, on the eve of trial, was more complete but also false. She claimed a 50% interest in the Nickyboy Trust and the joint bank accounts and investment account with Mr. McGrail. At trial, Ms. Sens was called as an adverse party and admitted that her interest in the trust assets was less than 50% (para. 91). She maintained that she paid one-half of the cost of the truck and paid one-half of the down payment on the first New Zealand property. I did not accept these assertions (para. 65); c) Her financial disclosure about the duplex purchase and financing was belated and sparse (para. 118); d) I concluded that the likely purpose of the New Zealand joint investment and the trust was to hide the assets and to protect them from Mrs. McGrail, and that Ms. Sens was knowingly complicit in this (para. 94). I observe that should Mr. McGrail fail to pay the spousal support amounts ordered, the trust may present a significant hurdle to enforcement. e) I noted that Ms. Sens and Mr. McGrail had intermingled their financial affairs in such a way that it was not possible on the evidence at trial to sort out who contributed what to the joint assets (para. 62). Nevertheless, I concluded that Ms. Sens had received financial transfers from Mr. McGrail (para. 65). Thus, while Mr. McGrail was underpaying spousal support, Ms. Sens was receiving financial benefits from him. Mr. McGrail has not yet paid the arrears of spousal support or the retroactive spousal support I ordered. It may be difficult or impossible for her to obtain payment in full as ordered. Ms. Sens bears some responsibility for those circumstances. Payment of costs to Ms. Sens would be very unfair in all of the circumstances. [24] Ms. Sens and Mr. McGrail contend that the existence of the Nickyboy Trust was disclosed in the list of documents of Mr. McGrail in June 2014, well before the trial. This may be so, but it does not excuse the failure to make accurate and complete disclosure on the financial statements, whose purpose is just that. [25] Ms. Sens argues that she should receive special costs from Mrs. McGrail. My conclusions set out above preclude any such order. Nonetheless I consider it appropriate to deal briefly with the argument for special costs that was made. [26] It was argued that there was no reasonable basis for the claims against Ms. Sens, at all, and that joining Ms. Sens was "reckless" and reprehensible. I do not agree. There was a basis for asserting that Mr. McGrail contributed to the duplex purchase. The claim was not based only on the information Mrs. McGrail obtained from Mr. Compton, which I discounted (para. 117). I had suspicions about the investment as well, but these did not rise to the level of proof on a balance of probabilities. As noted, Mr. McGrail and Ms. Sens intermingled their financial affairs, and Ms. Sens benefited financially from Mr. McGrail, although the details are impossible to sort out precisely. [27] It was argued that Mrs. McGrail failed to examine Ms. Sens for discovery, and that had she done so relevant facts would have been obtained pre-trial, or issues could have been resolved pre-trial, and time saved at trial. There is no obligation to conduct an examination for discovery, and there can be many reasons either practical or tactical to decline to do so. The reasons for there having been no examination for discovery of Ms. Sens are not before me. She was called as an adverse witness at trial. This can be an effective way to prove a party's case: Dawson v. Tolko Industries Ltd., 2010 BCSC 1384, at para. 16. It can also be an effective tactic. [28] Some useful admissions were obtained. I do not accept that lack of examination for discovery lengthened the cross examination at trial. The opposite is too often true. The assertion is speculative. [29] In Gold v. Gold, 82 B.C.L.R. (2d) 180, McEachern C.J.B.C., for the Court (composed of five justices), said this about the judicial discretion to deny costs to a successful party (para. 20): The question, then, is: when should the Court order otherwise? With respect, when the court should order otherwise is a matter of discretion, to be exercised judicially by the trial judge, as directed by the Rules of Court. To lay down any strict guidelines or even to attempt to give exhaustive examples is not, I think, helpful because the facts and issues in each family law case vary so greatly. Factors such as hardship, earning capacity, the purpose of the particular award, the conduct of the parties in the litigation, and the importance of not upsetting the balance achieved by the award itself are all matters which a trial judge, quite properly, may be asked to take into account. Assessing the importance of such factors within the context of a particular case, however, is a matter best left for determination by the trial judge. [30] Here, the primary reason to deny costs is the conduct of Ms. Sens in the litigation, but the factors of hardship, earning capacity and the importance of not upsetting the balance achieved by the award itself are also relevant. In the result, I exercise my discretion to deny costs to Ms. Sens. "The Honourable Mr. Justice Verhoeven"