Court of Appeal for Ontario

Date: 2019-06-26

Docket: C66133

Judges: Feldman, Brown and Miller JJ.A.

Parties

Between

David Henry Knight Applicant (Appellant)

and

Christine MacDonald Knight Respondent (Respondent)

Counsel

Gary Joseph and Kenneth Younie, for the appellant

John P. Schuman, for the respondent

Hearing and Appeal

Heard: February 21, 2019

On appeal from: The order of Justice Clifford S. Nelson of the Superior Court of Justice, dated May 25, 2018, and from the costs order, dated October 4, 2018.

Reasons for Decision

Overview

[1] This appeal arises out of hard-fought – and expensive – matrimonial litigation. Mr. Knight, the appellant, argues that the trial judge erred in how he applied provisions of the parties' marriage contract governing equalization of net family property. He also seeks leave to appeal an award of costs to the respondent in the amount of $490,000.

[2] As set out below, we do not agree that the trial judge made any error with respect to the equalization of net family property, and the appeal on that issue is dismissed. Further, the test for leave to appeal the costs award is not met, and the motion for leave to appeal costs is therefore also dismissed.

Equalization of Property

[3] The trial judge found the parties' marriage contract, dated June 24, 2011, to be valid. The marriage contract excluded the appellant's corporate assets from division. It specifically provided that the parties agreed "to exclude [the appellant's] interest in the Corporations… and monies owing to him from the Corporations from the satisfaction of any judgment, settlement or agreement which may require [the appellant] to transfer assets or pay monies to [the respondent] as part of an equalization payment to her under the Family Law Act, as amended" (emphasis added).

[4] However, a question arose as to the status of monies owed by the appellant to his corporations.

[5] The appellant was unsuccessful at trial in seeking an unequal division of net family property. After the reasons were issued, the court wrote to the parties, requesting that they advise as to the specific quantum of the equalization payment and the amounts of child and spousal support payable. The parties were unable to reach an agreement on the calculation of the equalization payment. Counsel for the respondent wrote to the court on July 26, 2018, with the agreement of counsel for the appellant, to explain the nature of the disagreement. The letter to the court set out the parties' competing positions:

Paragraph 47 of your judgment reads as follows:

"[T]here are two items in dispute under the heading "Promissory Notes" (see part 2: Value of Debts and Other Liabilities on Valuation Date). They are of de minimis value, and I have ignored them."

Mr. Knight believes that in paragraph 47 of your judgment, you also intended to "ignore" the promissory notes listed at part six of the net family property calculation advanced by Ms. Knight (and included in the comparison of net family property statements filed during the trial) because paragraph 47 is the only place in your judgment where you make reference to these promissory notes and at paragraph 39 you stated you were using Mr. Knight's calculation as your "reference point." Further, you found that no other corporate debts or assets were included in his net family property.

Ms. Knight believes that you did not intend to "ignore" the promissory notes on the date of marriage because at that time, they were not de minimis, having a value of $67,315, which was reported as a debt owed by David to the corporations in the corporate [sic] on the corporate financial statements (exhibits 44 and 45), and because at paragraph 39 of your decision, you stated that you were not using Ms. Knight's calculation because she had noted the book value of the corporations in her calculation, which had no impact on the calculation in light of your decision with regard to the marriage contract.

[6] The trial judge, in his endorsement dated October 4, 2018, stated that the respondent's position was correct. He added, "I did not intend to ignore the value ($67,315) of the promissory notes on the date of marriage. This amount is not de minimis."

[7] On appeal, the appellant argues that the trial judge did not provide sufficient reasons on this issue to allow for appellate review. We disagree. The trial judge made an obvious slip in his initial reasons in characterizing $67,315 as a de minimis amount. Consequently, he did not adequately resolve the issue of how to treat the promissory notes in the net family property calculation. When this was brought to his attention by counsel's letter, he was presented with two competing arguments as to how the debts should be treated. He accepted the respondent's argument and rejected the appellant's. Nothing further was required.

[8] The appellant argues that the trial judge erred in including the promissory notes in the calculation of net family property because the promissory notes are "corporate in nature" and therefore excluded by the marriage contract from the calculation of net family property. Again, we disagree. The marriage contract specifically excludes from the net family property calculation monies owed to the appellant by the corporations. It does not exclude monies owed by the appellant to the corporations, which are personal debts. The promissory notes are not, in the sense used in the marriage contract, "corporate in nature".

[9] Further, we do not accept the appellant's argument that there was no evidence to support the finding of a debt of $67,315. As the respondent noted, at trial the appellant did not dispute that he owed $67,315 to the corporations at the date of marriage. His argument was, as it is on appeal, that the promissory notes are excluded by the marriage contract.

Costs – Leave to Appeal

[10] Far overshadowing the amount in issue in the substantive appeal is the costs order of $490,000 plus HST, enforced through the Family Responsibility Office. The appellant seeks leave to appeal. As explained below, we have concluded that leave to appeal the costs order should not be granted.

[11] More than half of the costs award is attributable to the fees of the respondent's accounting expert. At the hearing of the appeal, we requested that the respondent submit a brief to the court consisting of the accountant's invoices with brief submissions to provide context. The appellant provided reply submissions.

[12] The trial judge was cognizant that the costs award was high for a 13-day trial. However, the trial judge placed the blame entirely at the feet of the appellant, whose approach to the litigation he characterized as unreasonable: "[the appellant's] tactics coupled with his unacceptable offers to settle, leads me to conclude that his goal was to ensure that [the respondent] suffer a considerable financial defeat even if she enjoyed success at trial." The respondent's legal fees were in the amount of $265,000, while the appellant's legal fees came in at $172,000. The appellant did not object to any of the line items detailed in the bill of costs, but instead argued that he did not have a fair opportunity to review the bill of costs at trial. The trial judge rejected this submission. On appeal, beyond arguing that the overall quantum is disproportionate to the litigation, the only discrete error alleged is in awarding costs for previous steps taken in the litigation where no award of costs was made. The appellant objected to "the vast majority" of time docketed prior to June 2016, as this, he argued, was a reliable cut-off point for steps in the litigation that were governed by prior determinations that no costs would be ordered. He further argued that his own bill of costs was a reliable guide as to what would constitute a reasonable award.

[13] The largest component of the costs award is a disbursement of $228,306 paid to the respondent's accounting expert. Of this, $60,000 was for the preparation of a report on the appellant's income. The rest of the fees related to chasing disclosure, which was a significant problem for the respondent, and for attendances of the accountant at the disclosure motion, mediation, and trial. The respondent delivered an offer to settle prior to each stage and demonstrated she was prepared to settle the case on a reasonable basis.

[14] The appellant also seeks to appeal the decision to make the entirety of the costs award enforceable as support by the Family Responsibility Office, as opposed to only that part of the costs award attributable to the issue of support.

[15] As set out in s. 133(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43, a discretionary order of costs may not be appealed without leave. Leave to appeal a costs order will not be granted save where there are strong grounds upon which the appellate court could find that the trial judge had erred in the exercise of his or her discretion: Brad-Jay Investments Ltd. v. Szijjarto, 218 O.A.C. 315, at para. 21. An appellate court should set aside a costs order only if the trial judge has made an error in principle or if the costs award is plainly wrong: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[16] The appellant has not met this high threshold. The costs appeal is fact-based and seeks to have this court perform a line-by-line analysis that was not pursued at trial. The trial judge correctly referred to the relevant factors to be considered in awarding costs under Rule 24(11). We see nothing in the costs endorsement that reveals an error in principle or an error in the exercise of discretion on the part of the trial judge. Although the appellant frames the proposed appeal as a question of the proportionality of the costs award, there is no genuine argument advanced as to how the order is disproportionate, given the trial judge's explanation that the costs order is necessary to defeat what he perceived to be the appellant's tactic of ensuring the respondent would not benefit from her success in the litigation. In this instance, the appeal to proportionality is nothing other than an attempt to have this court second-guess the quantum of the award.

[17] With respect to the FRO order, there is no error in principle in the trial judge not having expressly addressed whether a lesser sum would have sufficed for enforcement. The enforcement decision is discretionary. Again, the appellant seeks to have this court descend into a detailed analysis of the respondent's dockets to determine whether some portion of the costs award ought to have been attributed to property division matters rather than support. This was not pursued at trial and this court will not grant leave.

Disposition

[18] The appeal is dismissed, and the motion for leave to appeal the costs award is dismissed. The respondent is awarded costs of the appeal in the amount of $20,000 inclusive of disbursements and HST.

K. Feldman J.A.

David Brown J.A.

B.W. Miller J.A.