Y.Z. v. A.C.

2020 BCSC 1734 Y.Z. v. A.C.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Y.Z. v. A.C., 2020 BCSC 1734 Date: 20201116 Docket: E153224 Registry: Vancouver Between: Y.Z. Claimant And A.C. also known as W.C. Respondent Before: The Honourable Mr. Justice Milman Reasons for Judgment Counsel for the Claimant, appearing via teleconference: R. Josephson K. Wang Counsel for the Respondent, appearing via teleconference: F. Lamer Place and Date of Hearing: Vancouver, B.C. October 15, 2020 Place and Date of Judgment: Vancouver, B.C. November 16, 2020 Table of Contents I. Introduction. 3 II. Costs. 4 A. Applicable Legal Principles. 4 B. The Parties' Positions. 6 C. Discussion. 8 III. Extraordinary Expenses. 10 A. The Issues in Dispute. 10 B. Past Expenses. 13 C. Future Expenses. 14 IV. Summary and Conclusion. 15 I. Introduction [1] On September 17, 2019, I rendered judgment following the trial of this family law action. My reasons are indexed at 2019 BCSC 1564. The issues addressed at trial included questions of parenting, child support and the division of family assets. My judgment left it open to the parties to address the question of costs and the sharing of certain child-related expenses by way of a subsequent application in the event that a further ruling was required. [2] The respondent, A.C., now brings this application seeking the following post-trial relief: a) an award of costs in the action, as a

matter of more than ordinary difficulty, on the basis that she was substantially successful at trial; b) a declaration that, as part of that costs award, she is entitled to recover as a disbursement her half share of the cost of the "judicial trustee" who was appointed to administer certain of the parties' corporate assets until the conclusion of the trial; c) an order that the claimant, Y.Z., pay his half share of certain extraordinary expenses that A.C. has incurred and will incur for their younger daughter while she attends university in the United States; and d) an order that those amounts be paid from the proceeds of sale of an apartment that Y.Z. owns in Vancouver. [3] Y.Z. opposes the relief sought in part. He argues that each party should bear their own costs, including the shared cost of the judicial trustee, because success at trial was, in his submission, divided. Y.Z. is willing to pay his share of their younger daughter's reasonable extraordinary expenses and to do so from the proceeds of sale of the Vancouver apartment, which he agrees should be sold. He disputes some of the expenses claimed as unreasonable and refuses to pay for future expenses until they are actually incurred. II. Costs A. Applicable Legal Principles [4] Rule 16-1(7) of the Supreme Court Family Rules states that the "costs of a family law case must be awarded to the successful party unless the

court otherwise orders." The principles to be applied in awarding costs under that provision were conveniently summarised as follows by Maisonville J. in Kraft v. Kraft, 2018 BCSC 1184 at paras. 18-23, rev'd in part on other grounds, 2019 BCCA 204: [18] Unless the court otherwise orders, costs in a family law case are awarded to the successful party: SCFR, Rule 16-1(7). A successful party is one who has been substantially successful: MacLean v. Mio, 2011 BCSC 148 at para. 30. [19] Determining which party has been substantially successful requires an objective comparison of the results obtained by the parties with the parties' submissions at trial: MacLean at para. 30. [20] In D.J.D. v. M.L.D., 2017 BCSC 1417, Justice Dardi summarized the law on determining substantial success: [14] In a family law case involving multiple issues and where there has been divided success, the Court must engage in a "substantial success" analysis. Substantial success, as defined in the authorities, is when the prevailing party succeeds on 75% or more on the matters in dispute. Substantial success in the litigation is measured objectively and is to be determined by the trial judge by considering the disputed matters globally. The weight and importance of all the matters in dispute are to be taken into account together with the parties' corresponding relative success or failure. The 75% success

threshold is intended to serve as a "rough and ready guide" and the Court is not required to evaluate the substantial success threshold with mathematical precision: Gold v. Gold (1993), 82 B.C.L.R. (2d) 180, 106 D.L.R. (4th) 452 (C.A.), leave to appeal ref'd [1993] S.C.C.A. No. 441; Fotheringham v. Fotheringham, 2001 BCSC 1321, leave to appeal ref'd 2002 BCCA 454; Paul v. Pumple, 2013 BCSC 1844; Marquez v. Zapiola, 2014 BCCA 35 at paras. 15-16; D.R. v. E.P.R., 2016 BCSC 550 at para. 8. [15] In Fotheringham at para. 46, Mr. Justice Bouck endorsed a four-step inquiry in assessing whether a party in a family law case has achieved substantial success in the litigation: 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] It is clear from the appellate decisions that a trial judge retains the discretion to determine whether there is a sound basis for displacing the usual costs award. Any discretionary exception to the usual costs rules must be made judicially: Bailey v. Victory (1995), 4 B.C.L.R. (3d) 389 at para. 13, 57 B.C.A.C. 23 (C.A.). [21] In Litt v. Gill, 2016 BCCA 288, Justice Garson commented on the unique problem costs pose in family law cases involving multiple issues, noting that the concept of "success" may require a more flexible approach for the purposes of assessing costs: [53] At its most basic, the successful party is the plaintiff who establishes liability and obtains a remedy, or the defendant who obtains dismissal of the plaintiff's case: Loft v. Nat, 2014 BCCA 108 at para.

46. This general principle is more difficult to apply in the context of family cases, where there may be a panoply of claims advanced by each party, and divided success. There, a more flexible "substantial success" test may be more appropriate: see this Court's decisions in Harras v. Lhotka, 2016 BCCA 246 at para. 48 and Marquez v. Ziapola, 2014 BCCA 35 at para.

16. Costs can also be divided among parties where there is divided success. Success does not imply that a successful plaintiff must be successful on every issue in order to recover costs: Robbins v. Pacific Newspaper Group, 2006 BCSC 872, 54 B.C.L.R. (4th) 135 at para. 17. [22] In Gold v. Gold, [1993] B.C.J. No. 1792 (Q.L.), 106 D.L.R. (4th) 452 (C.A.), the Court of Appeal described the trial judge's discretion to deviate from the usual rule that costs are awarded to the successful party: [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. [23] The onus of persuading the court that it should depart from the usual rule rests on the unsuccessful litigant: Louie v. Louie, (1996) 64 A.C.W.S. (3d) 1321 (S.C.) at para.

7. B. The Parties' Positions [5] In their submissions, the parties each claimed to have achieved a level of success in the litigation that supports their position on costs. They urge me to weigh the relative importance of the issues addressed at trial using various criteria, such as the importance of those issues to the parties, the amount of trial time that they occupied, and the number of paragraphs devoted to them in their closing arguments, my reasons for judgment or my final order. [6] By her calculation, A.C. claims to have prevailed on issues comprising approximately 93% of the total. She arrives at that figure by allocating the following percentages to the issues addressed at trial: Issue Percentage Successful Party Custody/Access 50% A.C. Child support 5% A.C. Computation methodology 20% A.C. Inventory write-off 3% A.C. Severance liability accrual 3% mixed GSM patents 3% A.C. Xinni lands 3% A.C. Huayi liquidity discount 2% Y.Z. Wasted legal costs 3% A.C. Benefits retained (payments to employees) 3% A.C. Benefits retained (other) 3% A.C. Minto renovations 2% A.C. [7] Y.Z. argues that neither party achieved 75% success. His interpretation of the relative importance of the issues addressed at trial, and the party who succeeded on them, is as follows: Issue Number of paragraphs in the judgment Successful Party Guardianship 11 A.C. Protection order 19 A.C. Child

support 11 A.C. Extraordinary expenses 6 Y.Z. ZSM inventory write-off 11 mixed ZSM severance liability accrual 5 Y.Z. GSM patents 10 mixed Xinni lands 7 Y.Z. Huayi liquidity discount 3 Y.Z. Wasted legal costs 6 Y.Z. Benefits retained (payments to employees) 6 mixed Benefits retained (other) 9 A.C. Minto renovations 5 Y.Z. Canadian real estate 2 mixed Chinese real estate 2 mixed Aircraft 2 mixed Jewelry 2 mixed Bank accounts and other liquid assets 3 mixed Art and furniture 3 A.C. C. Discussion [8] It appears to me that both parties' arguments strive, despite the authorities, for an excessive degree of mathematical precision in allocating weight to the issues that were addressed at trial. [9] My judgment was divided into two broad categories: parenting and financial issues. I accept that the parenting issues (essentially, guardianship, parenting time and the protection order) were the most important to the parties in subjective terms and that they occupied a significant amount of trial time. I am also satisfied that A.C. generally prevailed on those issues. [10] I have reached a different conclusion with respect to the financial issues, however. I find that success on those issues was more evenly divided. Whereas A.C. clearly prevailed on some of them (for example, the amount of child support payable, the validity of the ZSM inventory write-off, the value of the GSM patents and

the value of the Xinni lands), Y.Z. clearly prevailed on others (for example, the reasonableness of the extraordinary expenses incurred for the children, the wasted legal costs in China and the Huayi liquidity discount). In many cases, the final result can more fairly be seen as mixed (for example, with respect to the severance liability accruals and the Minto property renovations). Even where one party was nominally successful on a given issue, that success was often only partial when considered in the context of the result that was originally sought. [11] If the parenting issues should garner 50% of the weight to be allocated among the various trial issues and success was split more or less evenly on the remaining ones, A.C. has a compelling case that she achieved something close to a 75% success rate overall. I am not persuaded that she actually did, however. Although the parenting issues may have been the most important to the parties in subjective terms, I have concluded that it was primarily the financial side of the case that made the litigation as lengthy, complicated and expensive as it was. [12] While the relative importance of the financial issues was reflected to some extent in the amount of trial time devoted to them, that trial time appears to have been only the tip of the iceberg. It was apparent that considerable time, energy and money were also spent behind the

scenes gathering, distilling and preparing the financial evidence for presentation at trial. To that end, the parties engaged a multitude of professional consultants, either jointly or separately, in Canada, China and elsewhere, to make their respective cases on those issues. The magnitude of that endeavour tips the scales in favour of the financial issues as the main driver of litigation costs in this action. [13] Weighing the relative importance of the issues with that observation in mind, I have concluded that neither party achieved substantial success at trial. It follows that the appropriate order is for the parties to bear their own costs. [14] That conclusion also leads me to reject A.C.'s application to recover her share of the cost of the judicial trustee as a disbursement. Because she is not entitled to an award of costs generally, she cannot recover that or any other disbursement. Moreover, the judicial trustee was appointed by way of a consent order to hold the parties' interests in their businesses pending the outcome of the trial. The parties also asked the judicial trustee to investigate and report on the benefits that each party took for themselves from the businesses in the years immediately preceding the trial. I agree with Y.Z. that the resulting report identified substantial benefits going both ways. For that reason as well, I have concluded that the cost of

the judicial trustee should be shared jointly. III. Extraordinary Expenses A. The Issues in Dispute [15] In my trial judgement, I awarded A.C. the following amounts with respect to the children: a) $257,669 in retroactive child support for both daughters; b) $314,831.78, reflecting Y.Z.'s half share of certain extraordinary expenses that A.C. had incurred for both daughters prior to trial; c) $75,915, reflecting lump sum prospective child support for the parties' younger daughter until she left for university (15 months at $5,061 per month); and d) a balloon payment of $80,000 to cover future extraordinary expenses that A.C. expected to incur for the parties' older daughter while she attended university (an award that was not contested). [16] Although A.C. also sought a similar balloon payment to cover the extraordinary expenses expected to be incurred for the parties' younger daughter while she attended university, that relief was opposed and I refused to grant it. Instead, I ordered Y.Z. to pay his half share of the younger daughter's reasonable expenses as and when they were incurred. [17] My reasons for judgment on that subject stated as follows at paras. 92-94: [92] With respect to the prospective expenses for C.Z. [the parties' younger daughter], A.C. seeks a lump sum payment to cover her extraordinary expenses while attending university in the coming years, in an amount

equivalent to those that have been incurred for S.Z. [the parties' older daughter]. A.C. argues that Y.Z. cannot be relied upon to comply with any order to pay support, particularly after the conclusion of this trial, when his ties to Canada will be tenuous. She argues that requiring his approval to incur expenses for C.Z. is a recipe for future conflict among the parties. She argues that Y.Z. may withhold his consent unreasonably in an effort to control their behaviour. [93] Y.Z. opposes this aspect of the claim on two grounds. First, he says that C.Z.'s expenses are not likely to be identical to those of S.Z. and it would therefore be more appropriate to deal with C.Z.'s expenses as and when they are actually incurred, particularly given that it is not yet clear what path she will take after she graduates from secondary school. In addition, Y.Z. says that he can be relied upon to pay reasonable expenses incurred for his daughters. [94] I am not prepared to make a lump sum, prospective award of special expenses for C.Z. I am not persuaded that it will be unduly burdensome, or require an unrealistic degree of cooperation between her parents if A.C. must periodically send Y.Z. a list of C.Z.'s expenses to which he is being asked to contribute. My order will be that the parties will share 50/50 in future reasonable expenses while C.Z. remains a student. Y.Z. will have an

incentive to pay his half share of those expenses, if reasonably incurred, in order to preserve and build on the remaining thread of his relationship with C.Z. If that turns out to be unduly optimistic, A.C. can bring an application to the Court to compel his contribution. In that event, Y.Z. owns real property in British Columbia of sufficient value to cover any future liability that may arise in this category. [18] Since then, A.C. has sought reimbursement from Y.Z. for his half share of expenses totalling $139,577.86 (his half share of which being $69,788.93), but without success. [19] After an exchange of correspondence between counsel, Y.Z.'s counsel initially confirmed that Y.Z. would pay his half share of the "confirmed amount" claimed to that point in time. In subsequent correspondence, however, his counsel suggested that because Y.Z. did not have adequate funds in Canada to make the requested payment, it should be taken instead from the proceeds of sale of his Vancouver apartment, along with an additional interest payment to account for the attendant delay. At trial, the parties attributed a value of $7 million to that apartment. By my order of December 12, 2019, a charge was placed on title to that property to secure A.C.'s claim for costs. [20] A.C. responded to that suggestion by bringing the present application, renewing her request for an immediate balloon

payment. She argues that, in light of recent history, Y.Z. cannot safely be relied upon to meet his obligations in this regard, as I had optimistically expected he would in my judgment. A.C. argues that Y.Z. should not be believed when he asserts that he does not have adequate funds available in Canada to pay the amount demanded, because he was able to pay the net trial judgment of $573,339.78 in full less than one year ago. [21] Moreover, A.C. argues that the path that their younger daughter intends to follow in university has now been clarified. She is now planning, I am told, to attend Barnard College at Columbia University in New York where she will seek a combined bachelor's and master's degree over five years. Relying on a budget totalling $896,801 for the anticipated extraordinary expenses over those five years, A.C. seeks a balloon payment for half of that sum, or $448,300, to be paid from the sale of the Vancouver apartment. She also seeks to have sole conduct of sale of the Vancouver apartment if payment is not forthcoming. [22] In his response to the present application, Y.Z. accepts that he must pay his half share of reasonable extraordinary expenses as contemplated by my order. He argues, however, that the expenses claimed to date are excessive and that a reasonable total would be $116,257.97 (his half share of which being $58,126.49). He expects to be able to pay

that amount "within the next few months." [23] To cover future expenses, Y.Z. urges me to order that a total of $342,500 (rather than the $448,300 sought) be placed into his counsel's trust account from the proceeds of sale of the Vancouver apartment to secure his contributions. His proposal is that A.C. can seek payment periodically from that fund to cover Y.Z.'s half share of the future expenses before they are incurred. The parties will either agree on the amount to be paid or, failing agreement, may seek a ruling from the court. Whatever is left in the account after five years will be returned to him. B. Past Expenses [24] Of the $139,577.86 that A.C. claims for expenses already incurred, Y.Z. takes issues with the following: (a) Travel to Paris (business class flight) $5,305 (b) Language School in Paris (€1,323 x 1.57) $2,077.11 (c) Motorcycle Insurance $502 (d) St. Regis Hotel in Bal Harbour (three nights) $3,634.54 (e) Mulgrave Bus Fare $585 (f) Dental Work $7,609.24 (g) BMS Personal Training $3,612 Total: $23,324.89 [25] On that basis, he submits that the appropriate order is that he pay half of the remaining amount, $116,252.97, or $58,126.49 [26] I agree with Y.Z that the disputed items, with the exception of the $585 bus fare associated with school, have not been shown to be proper extraordinary expenses. I was given almost no evidence, beyond the receipts

themselves, to explain what they are or why they were necessary. On their face, they appear to be either unnecessary, unreasonable or to fall more properly under the rubric of the $5,061 per month in child support that Y.Z. has already paid for this period. [27] I am therefore ordering that Y.Z. reimburse A.C. for his half of $116,252.97 + $585 = $116,837.97, or $58,418.99, plus interest, by January 31, 2021. C. Future Expenses [28] Both at trial and on the present application, I have found most of Y.Z's objections to A.C.'s claims for extraordinary expenses to be well-founded. In those circumstances, I am not prepared to order that Y.Z. make an immediate balloon payment reflecting half of the budget that A.C. has put forward. It is preferable that both A.C. and Y.Z. continue to be incentivised to be reasonable with one another in connection with the funding of their younger daughter's higher education over the next five years. [29] Instead, my order will be that by no later than June 30, 2021, Y.Z. will pay the total amount claimed ($448,300) into an interest-bearing trust account with Mr. Josephson's firm to secure payment of Y.Z.'s half share of future extraordinary expenses, along with any litigation costs that may be awarded against him in connection with any court application to compel such future payments. [30] A.C. may from time to time seek Y.Z.'s agreement to the

release of some or all of those trust funds to reimburse her for his 50% share of those expenses. In the absence of such an agreement, she may apply to the Court for an order to compel payment from trust, including the costs of any successful application. [31] I am not persuaded that it is necessary to stipulate in my order that A.C. must also seek Y.Z.'s agreement before expenses are actually incurred. The budget she has provided in support of the present application should serve as sufficient notice of the expenses to which she will be seeking a contribution in the future. Insofar as Y.Z. may be slow to respond, as he appears to have been recently, A.C. should not be precluded from paying the expense herself and seeking reimbursement later. [32] The funds in the trust account, less any payouts, should continue to be held in trust until the later of: a) June 30, 2025; or b) the final disposition of any court applications filed by A.C. prior to that date seeking a payment out of trust. [33] Any funds remaining in the account thereafter should be returned to Y.Z. IV. Summary and Conclusion [34] By no later than January 31, 2021, Y.Z. is to pay A.C. $58,418.99, plus interest, reflecting his half share of the extraordinary expenses previously incurred by A.C. [35] By no later than June 30, 2021, Y.Z. is to pay $448,300 to Mr. Josephson's firm for it to hold in an interest-bearing

trust account on the terms contemplated by these reasons for judgment. [36] Upon payment of those amounts, the charge placed on title to the Vancouver apartment pursuant to my order of December 12, 2019 will be released. If either of those payments is not made in full by those dates, then A.C. will be at liberty to seek conduct of sale of the Vancouver apartment. [37] The application is otherwise dismissed, with each party bearing their own costs of the action, including this application. "Milman J."