Court File and Parties
COURT FILE NO.: FS-16-407910 DATE: 20190219 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Meltem Hassan AND: Mohamed Faizul Hassan
BEFORE: J.T. Akbarali J.
COUNSEL: Vanessa Tynes-Jass and Annamaria Perruccio for the Applicant Amanda Cohen for the Respondent
HEARD: In writing.
Endorsement
Overview
1The parties have settled all the outstanding issues between them in their family litigation except for costs. The respondent seeks an order for costs of the litigation, arguing he has been successful when one considers the offers to settle he made throughout the litigation, and due to what he claims is the applicant’s unreasonable behaviour. His bills of costs collectively disclose costs of $198,750.97. The applicant argues that no costs should be awarded where there is a settlement, or, alternatively, that if costs are awarded, they should be in her favour, due to what she claims is the respondent’s unreasonable behaviour. Her bill of costs discloses costs of $142,308.61.
2I must thus determine the circumstances in which the court can make an award of costs where parties have settled the litigation, and what, if any, costs award should be made in this case.
Background
3I was assigned to be the trial judge in this family litigation. At the outset of trial, the parties attended before me very briefly before accepting an invitation to attend a pre-trial with Sanfilippo J. At the pre-trial, the parties settled all the outstanding issues between them, with the exception of costs. The parties have now placed written submissions before me to determine the costs of their litigation.
4The parties’ minutes of settlement provide that:
The parties acknowledge the issue of costs remains outstanding. If costs cannot be agreed upon by the parties within thirty (30) days, either party may contact the Trial Coordinator to schedule an attendance or determine a procedure for making costs submissions to the court, with a preference for written submissions.
5The parties filed voluminous written submissions on costs. The respondent then brought a 14B motion, and the applicant brought a 14B cross-motion for an order directing the procedure for filing costs submissions. The motion came before Sanfilippo J. who ordered that the matter could not be determined by 14B motion and directed the parties to schedule a case conference on the issues.
6The parties then scheduled a case conference, over which Horkins J. presided. At the case conference, Horkins J. noted that there was no judge familiar with the issues. On the parties’ agreement, she directed the issue of costs to me, as I was to have been the trial judge.
7The parties thus determined their own procedure for costs submissions. No judicial officer directed the parties to deliver written submissions without evidence; rather, they decided themselves that this was how best to proceed, and invested their resources in the preparation of these materials.
8Their decision to proceed based on written submissions only was not without precedent. The parties provided me with Wunsch v. Wunsch, 2013 ONSC 5208, in which Czutrin J. decided the issue of costs after a settlement on the basis of written and oral submissions. In that decision, at para. 3, Czutrin J. described the material before him as “only offers, documents (the trial record), and written and oral submissions”.
9However, the decision to rely only on written submissions was not without its risks. These were aptly identified by Templeton J. in Talbot v. Talbot, 2016 ONSC 1351, who pointed out that r. 24(10) of the Family Law Rules, O. Reg. 114/99, allows for costs to be decided in a summary manner by the judge who deals with a step in the litigation promptly after dealing with the step. That judge will have heard relevant and admissible evidence to render a decision, which evidence is also weighed and considered when dealing with costs. In Templeton J.’s view, no order ought to be made unless it is founded on the basis of admissible and relevant evidence. Thus, she reasoned, the practice of dealing with costs in a summary manner ought not therefore to apply to a judge who has not received admissible evidence relevant to the factors concerning costs.
10In this case, the parties seek a decision on costs where there is no judge who has dealt with the step who could render a costs decision. I would have been the trial judge, but no trial proceeded before me. I thus come to this costs determination without any prior knowledge of the parties’ litigation, positions or evidence. I have no record of judicial fact finding on issues relevant to costs, and no evidentiary record before me on which to make findings.
11The parties’ minutes of settlement expressed a preference for written submissions to deal with costs, no doubt to save expense. This is not a silly concern. As Leach J. observed in Witherspoon v. Witherspoon, 2015 ONSC 6378 at para. 42, attempts to address cost issues in a post-settlement context are unlikely to promote judicial economy. He wrote:
…application of the cost rules presupposes that the court is in a position to rely on factual or other objective findings that either support or detract from the parties’ respective submissions. However, that self-evidently will not be the case where the parties rely on matters and considerations that have never been the subject of any judicial fact finding, or corresponding judicial determination on issues or reasonableness, unreasonableness, or alleged misconduct. The parties in the case before me seem to have come to such a realization either consciously or instinctively, given their respective efforts to now revisit contentious issues and evidence, and belatedly have such matters resolved in their favour in order to justify their cost positions. However, an exercise that effectively encourages and requires the parties and the court to revisit and essentially litigate such issues, which supposedly have been resolved by a substantive settlement, seems entirely and inappropriately retrograde in nature.
12It is apparent that a position that does not promote judicial economy will also not promote the cost-effective determination of issues from the parties’ standpoint.
13The parties here have opted for economy rather than evidence. The parties have each attached some documents to their submissions, and it appears neither has objected to the other side’s documentation. To the extent the parties’ submissions can be verified by reference to the documents the parties have placed before me, I will consider the documents. I share the view of Templeton J. that any order I make must be based on relevant and admissible evidence. However, given the process chosen by the parties, and r. 2(2), (3) and (5) of the Family Law Rules, O. Reg. 114/99, in my view it is not necessary to require the documents to be attached to affidavits in order to deal with this case justly. At the same time, I place no reliance on assertions made in the parties’ written submissions that are not otherwise supported by the documents filed. Argument is not evidence and I will not treat it as if it were.
14It is within these limits, chosen by the parties, that the task of determining costs falls to me.
Issues
15The issues I must decide are:
a. When is it appropriate to award costs after a settlement of all other issues in the litigation? b. Are costs warranted in this case, and if so, to whom and in what amount? c. Are costs of these costs submissions warranted, and if so, to whom and in what amount?
Analysis
16Before I turn to the question of when it is appropriate to award costs after the other issues in the litigation have been settled by the parties, it is useful to first recall the general framework for the determination of costs in family law proceedings.
17Modern family costs rules are designed to foster four fundamental purposes: to indemnify successful litigants for the cost of litigation, to encourage settlements, to discourage and sanction inappropriate behaviour by litigants, and to ensure that cases are dealt with justly: Mattina v. Mattina, 2018 ONCA 867. The cornerstone of costs awards are proportionality and reasonableness: Beaver v. Hill, 2018 ONCA 840 at para. 12.
18Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. By r. 24(10)(a), the court is directed to make a decision on the costs of a step in the case promptly after dealing with the step, in a summary manner.
19Pursuant to r. 24 the successful party is presumptively entitled to costs, subject to the factors set out in Rule 24 – a caveat the Court of Appeal recently called “important”: Beaver v. Hill, at para. 10.
20The factors to consider are set out in r. 24(12), and include the reasonableness and proportionality of a number of enumerated factors as they relate to the importance and complexity of the issues. These factors include each party’s behaviour, the time spent by each party, any written offers to settle, including those that do not meet the requirements of r. 18, any legal fees and any other expenses, and any other relevant matter.
21There is no general approach in family law of “close to full recovery costs”: Beaver, at paras. 9-13. Rather, full recovery is only warranted in certain circumstances, such as bad faith under r. 24(8) or besting an offer to settle under r. 18(14): Beaver, para. 13.
When is it appropriate to award costs after a settlement of all other issues in the litigation?
22The applicant’s primary position is that the court should not award costs of the litigation where there has been a settlement. The respondent disagrees. Each relies on jurisprudence that supports their position.
23The respondent relies on Wunsch, supra, a 2013 decision of Czutrin J. in which he made the observation that:
[c]osts should not prevent settlement when parties can come to a reasonable settlement on all issues except costs. We should not force parties to go to trial and obtain success in order to recover disputed costs. A summary, fair, and reasonable determination of costs can encourage settlement (if costs are not part of the overall settlement). We need to find a way to address cases where costs impede settlement.
24In Wunsch, Czutrin J. made a summary determination of costs, relying in part on the behaviour of the parties in the litigation. He also considered the offers to settle and the result of the settlement, noting that he “compared the consent order to the parties’ positions throughout the court process to help [him] determine success as far as any entitlement and the other Rule 24 factors”.
25This reasoning recently found favour in Conley v. Pieterman, 2018 ONSC 292, where Mitrow J. was faced with a similar situation. He noted the competing line of cases (which I discuss below) and concluded that “any reluctance to award costs where a matter has settled “depends entirely on the circumstances, the claims made (and the context of the claims) and the general nature of the settlement achieved”. Mitrow J. found that the observations of Czutrin J., which I have cited above, were “cogent”.
26In contrast, the applicant relies on Witherspoon, where Leach J. undertook a lengthy analysis and concluded that a costs determination following a settlement is inappropriate absent compelling reasons. In particular, I note para. 42 of his reasons, which describes serious concerns with awarding costs after a global settlement of all other issues:
[42] Second, in my view, whether one is focused on pre-trial steps in the litigation or the other residual costs of the litigation, the attempt to argue cost entitlement and quantification through application of the normally applicable cost recovery rules, after the parties have reached a formal settlement of the substantive issues between them, without trial, is fundamentally misconceived and inappropriate. In that regard:
As noted above, the cost regime created for family law litigation in this province, through enactment of Rule 24 of the Family Law Rules, focuses in large measure on the criteria of “success”, (which creates a presumption of entitlement), and “reasonable” or “unreasonable” behaviour.
However, in my view, those criteria, and the degree of relative “success” in particular, presuppose the existence of objective benchmarks from which the court in turn can draw appropriate and reliable conclusions; e.g., by comparison of party positions and with objectively determined outcomes that reveal the true relative merits of each party’s position. Such objective benchmarks are lacking where the outcome against which parties attempt to argue their degree of “success” is not the product of judicial fact-finding and objective determination, but an agreed settlement.
For example, both parties in the case before me are now trying to argue that the agreed settlement has generated an outcome more in line with their pre-settlement desires, and more or less favourable than the outcome suggested by prior settlement offers. However, such arguments presuppose that the outcome achieved by settlement is a proper benchmark by which to assess relative success, and thereby the reasonableness of either party’s behaviour, insofar as the negotiated outcome should be presumed to coincide with the objective determination and outcome at which a court would have arrived, had the matter been the subject of judicial fact-finding and determination.
In my view, those underlying assumptions are self-evidently fallacious. As our courts have recognized, “there are doubtless many motivating factors why parties enter into settlements and why a particular party may resile from claims or defences to claims either made or responded to”, and “the reasonableness or unreasonableness of any party’s position in either asserting a claim, abandoning a claim or abandoning a defence or answer to a claim can depend on a myriad of factors”.
In that regard, experience has shown that parties to matrimonial litigation frequently decide to compromise and accept a settlement, effectively abandoning certain pre-settlement claims and defences without pressing them to trial, not because the party concedes in any way that positions previously held in the litigation have no objective merit, but because the party is simply tired of the ongoing acrimony, and/or feels unable to incur the expense of litigating the matter through to a final conclusion after trial. Given such realities, it seems to me that permitting post-settlement claims for costs, in which negotiated settlements are used after the fact as supposed benchmarks by which the objective reasonableness of pre-settlement positions should be measured, runs counter to public policy. Endorsing such an approach would actively discourage parties from making any compromises in order to achieve settlement.
Moreover, attempts to address such cost issues in a post-settlement context are unlikely to promote judicial economy. Again, application of the cost rules presupposes that the court is in a position to rely on factual or other objective findings that either support or detract from the parties’ respective submissions. However, that self-evidently will not be the case where the parties rely on matters and considerations that have never been the subject of any judicial fact finding, or corresponding judicial determination on issues or reasonableness, unreasonableness, or alleged misconduct. The parties in the case before me seem to have come to such a realization either consciously or instinctively, given their respective efforts to now revisit contentious issues and evidence, and belatedly have such matters resolved in their favour in order to justify their cost positions. However, an exercise that effectively encourages and requires the parties and the court to revisit and essentially litigate such issues, which supposedly have been resolved by a substantive settlement, seems entirely and inappropriately retrograde in nature.
For such reasons, our courts have held that, “where parties make a settlement as between themselves, the court … should be very slow to make an award of costs against one of the parties”, and “unless there are compelling reasons to do so, costs in the circumstances of a settlement between parties ought not to be awarded by the court”.
I agree with that approach, and am not persuaded that there are any compelling reasons to depart from it in the circumstances of this case. [cites omitted]
27Leach J.’s decision was relied upon by Templeton J. in Talbot. There, Templeton J. agreed that “any settlement must surely be presumed to have been the end result of negotiation and involve some element of compromise in the absence of any reference to the contrary or “clear capitulation…”: see para. 58.
28I agree with Czutrin J. that it can be problematic if costs are a barrier to settlement. However, I am not persuaded that attempting to address costs after a settlement is the right solution to the problem as a matter of course. As I have already reviewed, there are fundamental process problems in such cases as these. Either a judge who has not dealt with a step in an action is tasked with dealing with costs in a summary way, without a proper evidentiary foundation, or the proper evidentiary foundation is put before the judge, which risks an evidence-gathering process that may look much like the trial of the settled litigation would have looked. Which is preferable? Conclusions underpinned by findings made without evidence, or a process that leads to no or little judicial economy or savings (in time, money or stress) for the parties?
29While I understand Czutrin J.’s concern that an inability for parties to address costs after a settlement could impede settlement in some circumstances, I also agree with Leach J. that if a party could routinely seek costs after a settlement, the spectre of being responsible for costs could dissuade parties from reaching reasonable compromises. This is particularly so in family law cases, where severable offers are often made.
30Moreover, while Czutrin J. had regard to the result of the consent order to evaluate success in Wunsch, his reasons do not explain why the settlement is an appropriate marker of success. The issue appears not to have been raised before him. I find Leach J.’s articulation of the problems inherent in this approach to be compelling. Parties settle for many reasons, not all of which have to do with the inherent strength or weaknesses of their positions. As was noted in Witherspoon and Talbot, parties may settle because they are tired of the ongoing acrimony or cannot afford a trial. The factors at play may be legal, economic, social, political, emotional, or physical, among others.
31Moreover, even where a settlement reflects legal factors, it cannot be relied upon as a marker of how the court would have decided an issue. I offer the obvious example of what one might call all or nothing claims – a party may dispute the other’s entitlement to spousal support, or the validity of a marriage contract, for example. A settlement may reflect the relative risk of each party’s position, recognizing that there are factors for and against each position. Yet an adjudicated result would necessarily decide one way or the other. There can be no pretense that such a negotiated resolution approximates what the court would have found. Even in claims that are not all or nothing, settlements based on the assessment of the strengths of each party’s case almost always involve compromise, to reflect the degree of risk that each party faces.
32When parties settle, it is thus difficult, if not impossible, to determine which of them, if either, is the “successful party” for the purposes of r. 24.
33I thus agree with Leach J. that where parties settle as between themselves, the court should be slow to make an award of costs against one of them, and, unless there are compelling reasons to do so, costs in such circumstances should not be awarded.
34I also agree with Templeton J. that settlements must be presumed to have been the end result of negotiation and compromise in the absence of any reference to the contrary or “clear capitulation”. In my view, “clear capitulation” would be a compelling reason to award costs following a settlement.
35The cases I have reviewed take note of the behaviour of the parties in the litigation. In my view, unreasonable behaviour of the parties may also be a compelling circumstance that justifies an award of costs following a settlement. To that end, the claims made, the offers to settle delivered, and the settlement that was reached may assist in determining the reasonableness of the parties’ behaviour in the litigation.
36Capitulation and unreasonable behaviour thus may be sufficiently compelling factors to justify an award of costs following a settlement. However, as Leach J. noted in Fraser v. Fraser, 2017 ONSC 3774, the court retains the discretion to award costs in relation to settled issues. I should not be taken as limiting the instances in which a court may be compelled to exercise its discretion.
Are there compelling circumstances that justify the award of costs in this case?
37In my view, there are no compelling circumstances justifying an award of costs in this case.
38First, I note the issues that were engaged in this litigation. In her application, the applicant sought a divorce, child and spousal support, custody and access, equalization of net family property, exclusive possession of the matrimonial home, an order freezing assets, costs and interest.
39In his answer, the respondent claimed a divorce, child support, custody and access, unequal division of net family property, sale of family property, an interest in the parties’ matrimonial home, costs and interest.
40The respondent states that he delivered 27 offers during the course of the proceeding. That is not quite correct. There are 27 tabs in the respondent’s brief of offers, but some are accompanying cover letters. Some offers are comprehensive; others are not. On some dates, rather than make an offer severable, the respondent delivered multiple offers. It is more accurate to describe the respondent’s offers as follows:
a. On November 14, 2016 the respondent made a comprehensive, severable offer. b. On March 13, 2017, the respondent made a comprehensive, severable offer. c. On September 25, 2017, the respondent made a comprehensive, severable offer. Notably, while earlier offers had included significant sums for spousal support, this offer reduced spousal support to $0. Shortly before this offer, Kristjanson J. released reasons arising out of the respondent’s motion that, among other things, reduced interim spousal support to $0 based on a decrease in the respondent’s income. d. On November 16, 2017, the respondent made an offer to settle on a single issue: offering that he was a beneficial owner of the matrimonial home. e. On April 4, 2018, the respondent made a series of four offers. f. On August 10, 2018, the respondent made a series of seven offers. g. On August 19, 2018, the respondent made a series of three offers. h. On September 4, 2018, the respondent made a series of two offers that were not comprehensive. i. On September 6, 2018, the respondent made a series of three offers.
41The respondent’s September 6, 2018 offers were the foundation for the settlement reached by the parties six days later.
42For her part, the applicant delivered a comprehensive, non-severable offer in April 2017, and a severable offer in August 2018 that did not cover all issues, but was designed to narrow issues regarding the valuation of the parties’ assets. The applicant then made a comprehensive, non-severable offer to settle on September 7, 2018, some terms of which mirrored terms in the respondent’s offer.
43The respondent argues that many of the terms that were eventually settled on were offered in earlier offers he had made, before September 2018. He suggests that, because his offers were severable, the applicant should have accepted portions earlier. He points to this both as evidence of her unreasonable behaviour and his success.
44In my view, the history of these offers, and what they say about success or unreasonable behaviour, is not so clear-cut. In particular:
a. The applicant raises issues around the respondent’s disclosure. The respondent’s brief establishes that he produced significant and relevant disclosure. He argues that the applicant’s refusal to accept the disclosure as sufficient is further evidence of her unreasonable behaviour. However, the applicant has produced information from her expert who sought additional disclosure before completing a business valuation on the respondent’s book of business, and who did not receive it such that he was unable to complete a report before trial. There are arguments about the request being sent to the wrong email address; it may have been, but eventually it reached the respondent, and items remained unproduced. The respondent does not allege that the expert could have completed his review without the disclosure sought. Rather, he argues that the expert stopped asking for the information. This is an assertion without evidence. In view of the paltry state of the record, I have only the documents to rely on. They suggest that the respondent made significant disclosure, but the applicant’s expert required more that he never got. Without that disclosure, I cannot find that the applicant’s refusal to accept the property portions of the respondent’s earlier offers were unreasonable. Nor can I find it unreasonable that the applicant did not make more offers herself. b. The offers themselves are difficult to decipher. While the respondent alleges he bested different offers, or portions of them, at different times, some of the offers make reference to existing debt, without any evidence before me as to what the debt was at the point in time that the offer was made. It is therefore impossible for me to gauge whether the end result was more or less than what was earlier offered. Moreover, some of the terms of the offers were incomplete or unclear. c. The applicant alleges that she settled for other reasons beyond an assessment of the strength of her positions at trial. I have no evidence of that, but neither do I have evidence that the settlement is an accurate reflection of what the court would have done at trial. I note again Leach J.’s and Templeton J.’s observations in Witherspoon and Talbot, described above, that there are a myriad of factors at play in a settlement. d. In any case, while the respondent’s early offers on spousal support were better than the end result, they were made before the loss of a significant client – the loss that led to the decrease in his income as found by Kristjanson J. After her reasons on interim spousal support, the respondent did not increase his spousal support offer from $0.00 until September 6, 2018, six days before trial. The minutes of settlement reflect an increase in both child and spousal support from the positions the respondent had been maintaining since Kristjanson J.’s reasons were released.
45The respondent also argues that the applicant refused to believe his documentary evidence about the decrease in his income, and in particular, that he was not hiding income through a third party. He argues that in the face of his disclosure, this was unreasonable. This may be, but I see no costs associated with the applicant’s belief that the respondent was hiding income. The respondent’s income structure had some complexity, and the applicant was entitled to test it. The fact that in the settlement, spousal support increased from the husband’s offer of $0.00, maintained for years until six days before trial, and that his offer on child support also increased significantly, suggests that the applicant’s insistence on examining the respondent’s claims about his income were reasonable.
46Moreover, while the respondent tries to paint himself as the successful party, he minimizes the applicant’s success on spousal support and child support by stating that the only time and expense associated with the issue of support as of October 1, 2018 was nominal time on September 12, 2018 to negotiate this portion of the Minutes of Settlement. Given the interim support motion and the change in position in the respondent’s offer on spousal support shortly before trial, I disagree that with the respondent’s inference that the applicant’s success on support was only a minor win.
47The respondent also argues that there was a finding that the applicant engaged in unreasonable behaviour. Del Frate J., in costs reasons, noted that unreasonable behaviour on the part of litigants must be discouraged, and stated that “these principles have not yet had any effect on the applicant as of yet. Substantial awards have been made against her, yet she continues to litigate at each and every step.” Del Frate J. made a costs award against her to discourage the approach she had taken in the motion that had been before him.
48This demonstrates that costs awards were earlier made against the applicant for unreasonable behaviour. Without demonstration of further unreasonable behaviour, the applicant’s behaviour that has already been sanctioned in costs awards should not ground further costs awards.
49While the respondent makes some additional allegations of unreasonable behaviour, nothing in his materials satisfies me it rises to the level of a compelling circumstance that would justify awarding costs after a negotiated settlement.
50Similarly, the allegations of unreasonable behaviour made by the applicant, including delays in disclosure, are not sufficiently compelling to warrant a costs award. Other allegations, like the respondent acting in a deceitful, underhanded manner by underreporting his income, are not supported by documentary evidence.
51In conclusion, having regard to the offers, I see no evidence of capitulation or overwhelming success so as to compel me to make a costs award. Equally, having regard to the submissions as a whole, I see no evidence of unreasonable behaviour of either party sufficient to compel me to make a costs award. Nor do I see any other compelling reason justifying a costs award. The parties shall bear their own costs of the proceeding.
52In the event that I am wrong about whether compelling circumstances must be present for the court to award costs where there is a negotiated settlement, I would not have made a costs order in any event. The parties have divided success in the result of the settlement, such that neither is the successful party for purposes of r. 24, and I see no basis to apportion costs under r. 24(6). Moreover, there is no evidence to support an award of costs on any other basis under the rule.
Is an award of costs for the costs submissions warranted?
53In addition to the submissions I received on costs of the proceeding, the respondent delivered a sealed envelope containing an offer related to the costs submissions, and filed it, together with a bill of costs, in support of a request for costs of the costs submissions. I opened the sealed envelope after I finished writing my reasons on the costs of the proceeding.
54The respondent’s offer was for the applicant to pay him $95,000 in costs, or less than half of the costs he claimed. It is apparent that the respondent has not beat his offer.
55The applicant was the successful party on the costs submissions, as I have adopted her primary position, which is that no costs should be ordered. However, she makes no request for costs which is, in my view, appropriate.
56In conclusion, there shall be no order as to costs for the proceeding, including the costs of the costs submissions.
J.T. Akbarali J.
Date: February 19, 2019