Paul v. Pumple

2013 BCSC 1844 Paul v. Pumple IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Paul v. Pumple, 2013 BCSC 1844 Date: 20131008 Docket: 09-0880 Registry: Victoria Between: Susan Elaine Stacey Paul Claimant And Brian David Pumple Respondent Before: The Honourable Mr. Justice Goepel Corrected Judgment: The text of the judgment was corrected at paragraph 30 on October 11, 2013 Supplementary Reasons to Paul v. Pumple, 2013 BCSC 1279. Supplementary Reasons for Judgment on Costs Counsel for the Claimant: R.N. Stewart, Q.C. The Respondent appearing in person on his own behalf: B.D. Pumple Written Submissions of the Claimant: August 20, 2013 September 4, 2013 Written Submissions of the Respondent: September 3, 2013 Place and Date of Supplementary Reasons: Victoria, B.C. October 8, 2013 INTRODUCTION [1] Reasons for Judgment in this family law case were released on July 19, 2013 and can be found at 2013 BCSC 1279. In regard to costs, I said at para. 129: My tentative view is that there has been mixed success in this proceeding and each side should pay their own costs. The hearing fees should be split between them. If either party seeks a different costs award, they should make written submissions within 30 days of the date of these reasons. Any response submissions should be filed within 15 days thereafter. [2] Written submissions in regard to costs have now been received. The claimant, Ms. Paul, seeks an order awarding her 80% of the costs of the proceeding. The respondent, Mr. Pumple, supports the tentative view that I expressed in the reasons that each side should pay their own costs. [3] Ms. Paul agrees that there was mixed success at trial and acknowledges that she was not substantially successful. She submits, however, that the court should take into account her offer to settle, which was delivered to the respondent at the commencement of the trial on February 20, 2013, in determining costs. The offer to settle is reproduced at Appendix "A" of these reasons. BACKGROUND [4] In broad terms, the litigation concerned the division of the parties' assets and matters concerning ongoing child support. These issues were litigated in the context of a separation agreement that purported to resolve all outstanding issues between the parties. In the action, Mr. Pumple challenged the separation agreement and ultimately I accepted certain of his submissions. As a result, the terms of the separation agreement were modified. [5] A comparison of the judgment and Ms. Paul's offer to settle in relation to the division of assets and child support issues is set out below: Issue - Division of Assets The Offer The Judgment 1. Each keeps the assets they own. Each keeps the assets they own. 2. The sawmill is a joint venture. The sawmill is a joint venture through Courtland. 3. Mr. Pumple to pay the claimant $82,997.50. Mr. Pumple to pay the claimant $83,000.00. 4.Mr. Pumple to pay the amount due by June 1, 2013. Mr. Pumple to pay the amount due within 18 months of the judgment or the claimant can apply to have the K Road property sold. 5. The amount due to be secured by a Second Mortgage behind the existing 1st mortgage. The evidence at trial was that the balance owing on the first mortgage was $30,829.00. The amount due to be secured by second mortgage. Priority to be granted to a first mortgage (development mortgage) for $100,000.00. The Court does not state, but the claimant assumes, that the $100,000.00 amount is inclusive of the existing mortgage. 6. Courtland Resources - the Excavator to be sold. Courtland Resources - the Excavator to be sold. 7. The debts of Courtland are: GST - $8,000.00 BC Logging Tax - $12,000.00 Cost to Reforest - limited to $20,000.00. The debts of Courtland are: GST - $6,977.54 BC Logging Tax - $9,734.69 plus interest Cost to Reforest - $17,500.00. 8. Courtland debts to be paid from proceeds of the sale of the Excavator. Courtland debts to be paid from proceeds of sale of the Excavator. 9. Balance of proceeds to be divided with Respondent's share used to pay specified amount. Balance of proceeds to be divided assumed - no term specified. 10. No allowance for Mr. Pumple's claim for a compensation payment for work done on assets owned by the claimant. Mr. Pumple's claim for a compensation payment for work done on assets owned by the claimant is dismissed. Issue - Child Support and the Trust The Offer The Judgment 1. Trust amount to be reduced to $200,000.00. Trust amount stays at $250,000.00. 2. Trust amount to be secured by mortgage. Trust mortgage set aside - Court order that fund be established for $250,000.00 when the property sells and be administered under the terms of the final judgment. 3. Trust fund to secure arrears of child support and future child support. The fund to pay child support and to pay arrears of child support for both periodic payments and special expenses. 4. Ms. Paul to be the trustee. In the event of her death or incapacity, then her friend Olga Junkin will be the trustee. Ms. Paul and Mr. Pumple to be joint trustees with power to apply to court if they cannot agree on expenditures from the trust fund. 5. Mr. Pumple 's Guideline Income to be the greater of $52,800.00 or actual Guideline Income. Mr. Pumple's Guideline Income is $27,176.00 until the fund set up and thereafter as determined by the Child Support Guidelines. 6. Child Support of $800.00. Child support of $430.00 plus $100.00 for special expenses until the trust fund is created then child support equal to interest on the fund or $430.00 plus $100.00, whichever is the greater. 7. Arrears of child support from February 2008 to trial to be set at $30,000.00. Arrears of child support from February 2008 to trial is $9,130.00. 8. Arrears of special expenses are based on receipts not to exceed $30,000.00. Mr. Pumple to pay 50%. Arrears of special expenses are $13,599.50. The arrears to be paid from the trust fund. 9. Special expenses to include post-secondary education. Ms. Paul to pay the first $67,000.00 of the children's post-secondary education from education fund that she is to reimburse. [6] The offer to settle with regard to the division of assets is almost identical to the final judgment, except the judgment allows Mr. Pumple to obtain a development mortgage for $100,000 which would have priority to the mortgage securing the $83,000 debt. The amount due is payable in 18 months as opposed to June 1, 2013 as provided in the offer. There are minor differences in the amount of the Courtland debts to be paid from the sale of the excavator. [7] The offer to settle and the final judgment with regard to child support and the trust are different in a number of important respects. The major differences include Mr. Pumple's Guideline income, monthly child support, the arrears of child support, the trustees of the trust fund, and the payment of post-secondary education. In regard to each of these issues the outcome at trial is more favourable to the Mr. Pumple than the offer to settle. [8] The offer to settle did contemplate a reduction in the trust from $250,000 to $200,000. At trial, Mr. Pumple did not seek a reduction in the trust amount. He did seek an order cancelling the trust mortgage and succeeded on that issue. [9] Ms. Paul submits that with respect to the division of assets the terms of the offer very closely match the final judgment of the court and the offer should form the basis for ordering Mr. Pumple to pay the claimant's costs of the proceeding for the time expended in determining the division of assets. She concedes that the substantive differences between the offer and the final judgment in respect to child support and the trust mortgage are such that the offer does not provide a basis for ordering Mr. Pumple to pay the claimant's costs of the trial for the time expended in hearing evidence on this issue. She submits that approximately 80% of the trial was expended in dealing with evidence regarding the division of assets and, accordingly, seeks an order that Mr. Pumple pay 80% of the complainant's taxable costs of the proceeding. THE GOVERNING RULES [10] As this is a family law action the governing provisions concerning costs and offers to settle are set out in the Supreme Court Family Rules. Rule 16-1 deals with costs while Rule 11-1 deals with the costs implications of offers to settle. Near identical provisions are found in the Supreme Court Civil Rules (SCCR) at Rule 14-1 (costs) and 9-1 (offers to settle). [11] Rule 16-1 is the general rule concerning costs. The relevant provisions are: (7) Subject to subrule (9), costs of a family law case must be awarded to the successful party unless the court otherwise orders. (14) The court may award costs (a) of a family law case, (b) that relate to some particular application, step or matter in or related to the family law case, or (c) except so far as they relate to some particular application, step or matter in or related to the family law case and in awarding those costs the court may fix the amount of costs, including the amount of disbursements. [12] Rule 11-1 deals with offers to settle. The relevant provisions are as follows: Offer not an admission (3) An offer to settle is not an admission. Offer may be considered in relation to costs (4) The court may consider an offer to settle when exercising the court's discretion in relation to costs. Cost options (5) In a family law case in which an offer to settle has been made, the court may do one or more of the following: (a) deprive a party of any or all of the costs, including any or all of the disbursements, to which the party would otherwise be entitled in respect of all or some of the steps taken in the family law case after the date of delivery or service of the offer to settle; (b) award double costs of all or some of the steps taken in the family law case after the date of delivery or service of the offer to settle; (c) award to a party, in respect of all or some of the steps taken in the family law case after the date of delivery or service of the offer to settle, costs to which the party would have been entitled had the offer not been made; (d) if the offer was made by a respondent and the judgment awarded to the claimant was no greater than the amount of the offer to settle, award to the respondent the respondent's costs in respect of all or some of the steps taken in the family law case after the date of delivery or service of the offer to settle. [am. B.C. Reg. 119/2010, Sch. B, s. 12.] Considerations of court (6) In making an order under subrule (5), the court may consider the following: (a) whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or served or on any later date; (b) the relationship between the terms of settlement offered and the final judgment of the court; (c) the relative financial circumstances of the parties; (d) any other factor the court considers appropriate. [13] In her submission, Ms. Paul suggests that Rule 16-1 should be read together with Rule 11-1. She notes that under Rule 16-1(14) the court has discretion to determine by whom the costs relating to a particular issue should be paid. She notes that that rule allows costs to be apportioned to specific issues. In support of this submission, she makes reference to the decisions of British Columbia v. Worthington (Canada) Inc. (1998), 29 B.C.L.R. (2d) 145 (C.A.) and Sutherland v. Canada (Attorney General), 2008 BCCA 27. DISCUSSION A. Substantial Success [14] The starting point in any cost award is Rule 16-1(7). Pursuant to that Rule costs must be awarded to the successful party unless the court otherwise orders. Success has been equated to substantial success: Gold v. Gold (1993), 82 B.C.L.R. (2d) 180 (C.A.) at 185; MacLean v. Mio, 2011 BCSC 148 at paras. 17-31. In Fotheringham v. Fotheringham, 2001 BCSC 1321, 13 C.P.C. (5th) 302 [Fotheringham], Bouck J.at para. 45 held that as a rule of thumb, substantial success occurs when the prevailing party succeeds on 75% of the matters in dispute, considered globally. [15] In Fotheringham, Bouck J. suggested at para. 46 a four-step inquiry to determine substantial success in cases involving multiple individual issues: 1. First, by focusing on the "matters in dispute" at the trial. These may or may not include "issues" explicitly mentioned in the pleadings. 2. Second, by assessing the weight or importance of those "matters" to the parties. 3. 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. 4. 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. [16] Ms. Paul submits that her offer to settle should be considered in determining substantial success. I do not agree. That submission is contrary to numerous authorities that have held that offers to settle should not be considered in determining substantial success: P.G. v. D.D.G., 2002 BCSC 1582 [P.G.]; Dykman v. Dykman, 2011 BCSC 1169; and MacNutt v. MacNutt, 2013 BCSC 1159. [17] The reason that offers to settle should not be considered in determining substantial success is that substantial success is determined by comparing the positions taken at trial against the end result. The position taken by a party at trial, however, may be substantially different than that set out in an offer to settle: P.G. at para. 11. [18] This case is a prime example of why offers to settle are not considered in determining substantial success. The most contentious issue at trial was whether or not Mr. Pumple had operated the sawmill as a separate business. While it was common ground that Ms. Paul had financed the venture, the basis upon which she had done so was hotly contested. She testified that she had lent money to Mr. Pumple to start his own sawmill business and in the result he owed her $125,000. Mr. Pumple said the sawmill was a joint venture. He acknowledged he had to reimburse Ms. Paul for one-half of her investment and had to account to her for one-half of the proceeds he received when he sold the sawmill to a third party. He acknowledged that he had to account for $83,000, but denied owing $125,000. [19] At trial I accepted Mr. Pumple's position and ordered him to pay Ms. Paul $83,000. While the offer to settle reflected the trial result it was completely contrary to the position Ms. Paul took at trial. The trial was extended because of the position she took. Having lost the issue at trial, she is not entitled to fall back on her offer to settle as a basis upon which the issue of substantial success should be determined. [20] I do not accept the suggestion that costs should in this case be apportioned to specific issues. In both Worthington and Sutherland upon which the claimant relies, the Court of Appeal emphasized that applications to apportion costs should be the exception and not the norm, and should be limited to "relatively rare cases". That is, I suggest, especially true in family cases in which there is usually a multiplicity of issues to be determined. [21] In Fotheringham, before setting out his substantial success formula, Bouck J. discussed Worthington and pointed out the great difficulties that would arise in a multiple issue family case if costs were to be assessed based on individual issues. While there might be cases where such a division would be appropriate, this in my opinion is not such a case. [22] In this case, for the purposes of Rule 16-1(7), I find that neither party had substantial success. While each party had some success, neither party came close to succeeding on 75% of the matters in dispute, considered globally. Subject to consideration of the offer to settle, I find that neither party is entitled to an award of costs. B. The Offer to Settle [23] Offers to settle made pursuant to Rule 11-1 are only considered after the court has first determined costs pursuant to Rule 16-1(7). Rule 11-1 allows the Court to modify cost orders it would otherwise make absent an offer to settle. [24] Rule 11-1(4) allows the Court to consider an offer to settle in exercising its discretion as to costs. That discretion is however restricted and must be exercised within the parameters set out in the Rule. The court's options are limited to those set out in Rule 11-1(5): A.E. v. D.W.J., 2009 BCSC 505 at para. 51, aff'd 2011 BCCA 279 at para. 14. [25] The cost options set out in Rule 11-1(5) only apply to costs arising after delivery of the offer to settle. In this case the offer to settle was only delivered on the eve of trial and can only apply to costs after that date. [26] Rule 11-1(5)(a) allows the court to deprive a party of costs to which it might otherwise be entitled. As I have concluded that neither party is entitled to costs, Rule 11-1(5)(a) does not apply. [27] Rule 11-1(5)(b) allows the court to award double costs. An award of costs simpliciter is an essential pre-requisite for an award of double costs. As I have concluded that neither party is entitled to costs, Rule 11-1 (5)(b) does not apply. [28] Rule 11-1(5)(c) concerns an award of costs to which a party is already entitled. As I have found that Ms. Paul is not entitled to costs, that subrule does not apply. [29] Rule 11-1(5)(d) allows the court to award costs after the date of an offer to settle when the offer is better than the result the other party obtained. An award of costs under this provision is not dependent on a party being substantially successful at trial. The comparison for the purpose of this provision is between the result and the offer, not the positions taken at trial. [30] The wording of Rule 11-1(5)(d) is, however, problematic. Its terms suggest that it only applies to offers made by a respondent. In this case the claimant made the offer. I say the wording is problematic because in a family case whether a party is claimant or respondent is often a matter happenstance. There would not appear to be any reason why one party in a family case could benefit from Rule 11-1(5)(d) by making an offer to settle while the other party could not. [31] The language in Rule 11-1(5)(d) tracks the wording in the old Rule 37B(5)(d) and the present Rule 9-1(5)(d) of the SCCR. I suspect that when Rule 37B(5)(d) was adopted the rule makers overlooked the provisions of Rule 37(26.1) that made a specific provision for offers to settle in family law proceedings. That rule read: Despite subrules (23) to (26), if a party has made an offer to settle a claim in a family law proceeding, and the offer has not expired, been withdrawn or been accepted, and if the party making the offer obtains a judgment as favourable as, or more favourable than, the terms of the offer to settle, the party making the offer is entitled to costs assessed from the date the offer was delivered and to double costs assessed from that date. [32] Assuming, without deciding, that I can rely on Rule 11-1(5)(d) to award costs to a claimant, the question is whether or not I should. A prerequisite of Rule 11-1(5)(d) is that the result at trial is not more favourable than the offer to settle. This, in turn, depends on whether "result" refers to the overall result or the individual components of the offer. [33] This question was the matter of some debate in cases decided under Rule 37(26.1). In Vazzaz v. Vazzaz, 2006 BCSC 1146, Myers J. reviewed the authorities and concluded at para. 20: In my opinion, the cases that follow Fulton (i.e., where a "clear win" on every issue was not required) are persuasive in light of both the particular facts of this case, and the subsequent guidance of the Court of Appeal. First, I agree with Gill J. that where spousal support and the division of property are linked, it is preferable to compare the overall settlement to the Judgment. As I noted in my preceding Reasons in this case (at para. 75), the reapportionment of assets and determination of spousal support overlap. It seems appropriate to construe an offer to settle in the way that acknowledges this link. Second, such an approach in applying Rule 37(26.1), in my opinion, accords with the principle set out by the Court of Appeal in Graham. To consider the terms of an offer discretely in cases where the division of property and the provisions of maintenance are inextricably linked is an unduly restrictive approach that undermines the purpose of the rule, which as noted above, is to encourage and facilitate the settlement of disputes. Finally, to take such restrictive approach is to ignore Saunders J. A.'s observation that Rule 37(26.1) includes an "evaluative aspect". [34] I agree with the approach suggested by Myers J. The purpose of the Rule is to encourage and facilitate the settlement of disputes. Family law cases often include many different issues. In giving consideration to an offer to settle, the entire offer must be considered. Mr. Pumple was not entitled to pick and choose among the offer's component parts in determining whether or not to accept the offer; rather he was required to accept or reject the offer as a whole. What is important, therefore, is whether the overall result of the trial is better than the offer in its entirety. [35] The division of asset portion of the offer in this case cannot be separated from the child support and trust provisions. Ms. Paul concedes that Mr. Pumple, in relation to the child support and trust provisions, obtained a better result than that contained in the offer to settle. I find that the overall result of the trial was more favourable to Mr. Pumple than Ms. Paul's offer. In these circumstances the prerequisite of Rule 11-1(5)(d) has not been met and the offer to settle cannot give rise to an award of costs in favour of Ms. Paul. CONCLUSION [36] I find no basis to depart from my tentative conclusion that each side should pay their own costs. At trial no party was substantially successful. The offer to settle provides no basis upon which this Court should modify its cost award. I confirm my previous conclusion that each side should pay their own costs. "R.B.T. Goepel J." ___________________________________ The Honourable Mr. Justice R.B.T. Goepel APPENDIX "A"