Court File and Parties

Oshawa Court File No.: FC-09-904-0001 Date: 2017-06-01 Superior Court of Justice - Ontario

Re: Donna Flowers, Appellant And: William Martin Eickmeier, Respondent

Before: Justice J. Di Luca

Counsel: Steven Benmor, Counsel, for the Appellant Andrea Di Battista, Counsel, for the Respondent

Heard: December 2, 2016

Reasons for Decision

[1] This is an appeal of the costs award made by Arbitrator Brahm D. Siegel on March 22, 2016, made following an arbitration hearing wherein the Appellant was largely successful. The Appellant was awarded costs in the amount of $85,000 inclusive of HST and disbursements. On appeal, the Appellant claims that costs should have been $234,973.25 and submits that the Arbitrator erred in law by failing to award costs in relation to general steps taken in the proceedings prior to the mediation/arbitration.

[2] This appeal was originally argued before Justice Olah on December 2, 2016 and taken under reserve. Regrettably, Justice Olah has suffered an injury that prevents the timely completion of this decision. With the consent of the parties, I was provided with a transcript of the oral submissions before Justice Olah as well as the original file material.

[3] I have considered the transcript of the oral submissions and reviewed the file material. The submissions are detailed and helpful and I do not feel that it is necessary to have the matter re-argued before me. Indeed, neither party has requested a re-hearing.

[4] For the reasons that follow, I am satisfied that Arbitrator Siegel committed an error in law in his analysis of the costs issue. I am remitting the matter back to Arbitrator Siegel for a further consideration of costs in accordance with these Reasons. I otherwise uphold the decision of the Arbitrator as the balance of his reasons are detailed, thoughtful and fully support the fair and balanced exercise of discretion to award costs.

Background

[5] The parties are an unmarried common law couple with one child. The Respondent also has three children from a previous marriage who were raised by the couple. During their 19-year relationship, the parties accumulated a significant real estate and business portfolio. Once the relationship came to end, they engaged in an acrimonious and contentious separation which spanned a number of years and a number of lawyers. Following a number of steps before the Courts, the matter was submitted to mediation/arbitration. Regrettably, mediation failed and a six day arbitration hearing was required in order to address the issues raised.

[6] The Arbitrator issued lengthy and comprehensive reasons addressing the issues raised in the arbitration. The Appellant was largely successful on the key issues of unjust enrichment and joint family venture, child support and spousal support. Success on more peripheral issues was divided, though on the whole, the Appellant was clearly the successful party. The Respondent’s conduct was determined to be more unreasonable on the whole.

The Mediation/Arbitration Agreement

[7] The parties entered into a Mediation/Arbitration Agreement February 25, 2014 (“the Agreement”). The Agreement structures, inter alia, the nature of the mediation/arbitration process adopted by the parties, the issues submitted for determination and the scope of the appeal and review process contemplated following a determination. The Agreement notes that the process is to be governed by the law of Ontario and the law of Canada as it applies in Ontario.

[8] Paragraph 1 of the Agreement lists a number of substantive issues submitted for determination including; Child Support, Entitlement to Spousal Support, Duration of Spousal Support, Quantum of Spousal Support, property issues including Joint Family Ventures and limitation period issues and Costs.

[9] The Agreement is silent on what “Costs” is meant to apply to. However, it is clear that the parties both viewed “Costs” as relating to the costs of the entire proceeding and not costs just in relation to the mediation/arbitration. Indeed, at the request of the Arbitrator, the parties each filed written submissions less than 10 pages in length, seeking costs in relation to the entire proceeding. The Appellant requested $234,973 in costs and the Respondent requested $272,161 in costs, both inclusive of disbursements and HST.

Is Leave to Appeal Required?

[10] The appeal provisions of the Agreement are set out in paragraphs 28 and 29. These paragraphs provide that in addition to the appeal rights provided in s. 45(1) of the Arbitration Act, a party may appeal the final award on a question of law, without leave. The Agreement does not provide for an appeal on a question of mixed fact and law.

[11] The Respondent asserts that this appeal should be governed by s. 133(b) of the Courts of Justice Act, which requires that leave be granted where an appeal is only as to costs. The Respondent claims that this section governs because an Arbitrator sits in the same position as a judge does for the purposes of an appeal; see, Gray v. Brusby, 2008 ONSC 32816 and Palmer v. Palmer, 2010 ONSC 1565 at para. 5.

[12] While the Appellant did not initially seek leave, she did file a motion seeking leave on November 22, 2016. The motion was filed after the Respondent filed its factum raising the issue. The issue of leave was argued before Justice Olah and the Respondent objected both to the timing and content of the motion material.

[13] An issue arises as to whether the Courts of Justice Act applies to a dispute submitted to mediation and arbitration and if so, whether the Agreement in this case, which provides an appeal as of right on a question of law, overrides the Courts of Justice Act which requires that appeals in relation to costs orders be by way of leave.

[14] The exercise of determining costs is discretionary though guided by principles found in the case law and the applicable statutes. In view of the discretionary nature of costs awards, a high degree of deference is accorded to the original decision on appeal. Likely as a reflection of the discretionary nature of a costs award, the Courts of Justice Act imposes a leave requirement for an appeal of a costs order. The case law cited articulates the test in various forms, though it is clear that leave will only be granted in obvious cases where the discretion to award costs was exercised based on a wrong principle, a misapprehension of significant facts, or in a non-judicial fashion; see Johanns v. Fulford, [2011] O.J. No. 3121 (Ont. S.C.J.) at para. 2, Crisp v. Crisp, 2013 ONSC 4366 at paras. 5-9 and Robinson v. Robinson, 2000 CarswellOnt 3264 (Ont. S.C.J.). Implicit in the various articulations of the test for leave is the proposition that a clear error of law in assessing costs may be sufficient to meet the test for leave.

[15] It is clear that leave to appeal is to be granted sparingly and only in appropriate cases.

[16] In my view, leave to appeal is required in this case. Neither the Agreement nor s. 45 of the Arbitration Act specifically address the issue of leave to appeal in relation to a costs award. It seems incongruous that a party needs leave to appeal a costs order made by a trial judge but where an arbitrator sits in the position of a trial judge, the parties can contract out of a leave requirement in relation to an appeal of a costs award. In my view, in the absence of express statutory language in the Arbitration Act, the parties are not free to contract out of s. 133(b) of the Courts of Justice Act and thereby confer jurisdiction on the Court to consider a costs appeal without leave of the Court.

[17] That said, the Agreement in this case limits appeals to issues involving a question of law alone. Errors of mixed fact and law cannot be appealed. I am also satisfied that if a true question of law arises in relation to how the Arbitrator decided the issue of costs, that is an issue on which leave may be granted.

[18] The Notice of Appeal filed in this matter lists 11 “errors in law”, most of which appear to be errors of mixed law and fact, at best; see Costa v. Costa, 2008 CarswellOnt 1313 (Ont. S.C.J.) at para. 38 and Canada (Director of Investigation & Research) v. Southam Inc. at 12. The factum does not assist in this regard. Indeed, the grounds of appeal in the notice of appeal are simply re-stated verbatim as the entire “argument” portion of the Appellant’s factum.

[19] In submissions the Appellant fine-tuned the grounds of appeal listed in the Notice of Appeal and factum and essentially advanced one main issue, which is whether the Arbitrator erred in law by narrowing the “window” for awarding costs to only the time period of the mediation and arbitration, and excluding the various stages of the process that preceded the mediation and arbitration. The Appellant argues that Arbitrator erred, not in exercising his discretion in relation to assessing costs, but rather in determining that he could not, as a matter of law, consider costs in relation to steps taken in the proceedings prior to mediation and arbitration.

[20] I am satisfied that this issue raises a question of law that can be appealed, in accordance with the Agreement. I am satisfied that this is an issue of sufficient importance to the parties and that its determination will significantly affect their rights. In accordance with s. 133(b) of the Courts of Justice Act, this is an issue on which I am prepared to grant leave.

[21] As an aside, I note that the procedural steps in raising the leave issue were flawed. The Appellant did not initially seek leave to appeal and only filed a motion seeking leave following the filing of the Respondent’s materials. The motion also sought an abridgment of time for service of the leave application. Justice Olah heard argument on the leave issue and on the appeal proper at the same time. While the procedural steps were not followed to the letter, there has been no prejudice to the Respondent. In view of Rules 2(3), (4) and (5) of the Family Law Rules, I am satisfied that I should consider the question of leave to appeal along with the merits of the appeal.

[22] The Respondent also objected to the Appellant’s ability to seek relief from this Court on the basis that she had failed to comply with the costs Order of Gilmore J. dated January 3, 2014 which required that certain costs be paid upon the conclusion of the trial, a final settlement or within 18 months, whichever is sooner. The Respondent relies on the Court’s discretion as set out in Rule 1(8)(a) and (e) of the Family Law Rules. The Appellant argues that the failure to pay this costs Order is not fatal at this stage as the Arbitrator remains seized of certain matters and therefore the matter is not finally settled. In my view, this is not an appropriate case in which I should exercise my discretion to prevent the Appellant from seeking further relief from the Court, even assuming that she has failed to comply with the Order of Gilmore J. This matter has a long, convoluted and contentious history. The Arbitrator made a clear and supported finding of fact that the Respondent was in large measure more unreasonable than the Appellant through the course of the litigation. As well, the Appellant was by far the more successful party. These circumstances do not support the imposition of such a drastic remedy as foreclosing appellate review of the costs award of the arbitrator.

The Reasons of the Arbitrator

[23] The Arbitrator issued lengthy and detailed reasons that carefully and comprehensively review the issue of costs as advanced by the parties. In relation to the “window” issue, the Arbitrator dedicated approximately three pages of his reasons to determining the appropriate time frame for his assessment of costs.

[24] The Arbitrator approached the issue by reference to Rule 24(10) of the Family Law Rules, which requires that promptly after each step in a case the Judge or person who dealt with that step shall decide in a summary manner who, if anyone, is entitled to costs, and shall set the amount of costs. The Arbitrator noted that the case law interpreting this Rule suggests that it would be inappropriate for a decision-maker to “go back in time” and assess costs retroactively in relation to earlier steps of the process, unless that costs decision was “reserved” to the final decision-maker.

[25] In this regard, the Arbitrator noted that earlier disclosure Orders made on September 30, 2009 and January 12, 2011 contained no provision for costs, the Order dated May 17, 2012 awarded no costs and a final Order made on November 13, 2013 specifically addressed costs. It should be noted that the Order of Ferguson J. dated May 17, 2012 is actually endorsed “Costs of today reserved”.

[26] The Arbitrator noted that his mandate began on March 20, 2014, and held that he would only assess costs prior to that date if they related to steps taken specifically with respect to the arbitration. The Arbitrator cited Ulch v. Hicks, 2011 CarswellOnt 8136 (Ont. C.J.) and C.(K.D.) v. C.(M.C.), 2007 CarswellOnt 2823 (Ont. C.J.) in support of his finding.

Analysis

[27] In my view, the Arbitrator erred in law in determining that the appropriate window for assessing costs was limited to the discrete step of the proceeding he was involved in; namely, the mediation and arbitration.

[28] Rule 24(10) of the Family Law Rules supports the position that costs are to be addressed at each discrete “step” of the proceeding: see Husein v. Chatoor, 2005 ONCJ 487, [2005] O.J. No. 5715 (OCJ). If a party does not seek costs in relation to a certain step in the proceeding and if a costs order is not made, the party may be prevented from seeking costs at a later point in time. As the Court of Appeal for Ontario explains in Islam v. Rahman, 2007 ONCA 622 at para. 2:

… the trial judge erred in failing to exclude from the award of costs amounts claimed for steps taken in the case where no order was made as to costs or where there was silence on the issue. Rule 24(10) of the Family Law Rules provides that the judge who deals with a step in a case shall decide who, if anyone, is entitled to costs. If a party who has served an offer to settle the case as a whole wishes that fact taken into consideration in relation to a particular step, it is incumbent on that party to raise that issue with the judge who deals with that step. In this case, various steps were taken (e.g. motions, conferences) in relation to which either there was an endorsement that there be no order as to costs or the issue of costs was not addressed. In the absence of a specific order for costs in favour of the respondent, the trial judge should have disallowed costs claimed by the respondent in relation to such steps.

[29] In a subsequent decision, the Divisional Court in Houston v. Houston, 2012 ONSC 233, addressed the scope of Rule 24(10) in view of Islam v. Rahman and noted the following:

The Appellant also argued that because Family Law Rule 24(10) requires the court to fix the costs at the end of each stage in the litigation, a trial judge may only award costs relating to the trial itself and as such, the trial judge erred by awarding costs for other than the trial. In support of this position, counsel cited Islam v. Rahman, 2007 ONCA 622, Jahn-Cartwright v. Cartwright, 2010 ONSC 2263, [2010] O.J. 3307, Biant v. Sagoo, [2001] O.J. 3693 and Moore v. Riley [2005] O.J. 3021. We do not interpret these cases to stand for this broad proposition.

Rule 24(10) provides as follows: “Promptly after each step in the case, the judge or other person who dealt with that step shall decide in a summary manner who, if anyone, is entitled to costs, and set the amount of costs.”

Citing this rule, the Court of Appeal in Islam v. Rahman, accepted that there should be excluded from an award of costs at trial amounts claimed for steps taken in the course of the litigation where no order was made as to costs or where there was silence on the issue of costs. However, it is important to understand that the rule and the decision of the Court of Appeal speak to costs applicable to steps in a case which are addressed by a judge, such as motions and conferences. Surely the rule was not meant to extend to steps which do not require any form of judicial intervention, such as preparation of pleadings and financial statements, property evaluations, document production, attendance at questioning, review of transcripts, compliance with undertakings, and preparation for trial, to name but a few. [Emphasis added]

[30] The approach articulated by the Divisional Court in Houston v. Houston has been applied in a number of cases including J.C.M. v. K.C.M., 2016 ONCJ 551 at paras. 70-72, a decision written by the same judge as C.(K.D.) v. C.(M.C.), one of the decisions relied upon by the Arbitrator: see also Walts v. Walts, 2014 ONSC 98, Wunsch v. Wunsch, 2013 ONSC 5208, and Czirajak v. Iskandar, 2010 ONSC 3778.

[31] As a result, I find that the Arbitrator erred in law in his approach to Rule 24(10) of the Family Law Rules. The scope of the Rule, as interpreted in the case law cited, does not prevent a party from seeking costs in relation to general steps in the proceedings not specifically related to a discrete step in the proceedings requiring judicial intervention. Costs accrued from these general activities are properly considered at the end of a proceeding. The Arbitrator in this case was sitting in the same position as a trial judge and should have considered the issue of costs relating to general steps in the proceedings. His failure to do so is a reviewable error.

Remedy

[32] In my view, the appropriate remedy is to remit the matter back to the Arbitrator for further consideration of the issue as permitted by section 45(5) of the Arbitration Act. In this regard, I wish to make some observations.

[33] I am not ordering a de novo costs hearing. The parties have made submissions and the Arbitrator has made a number of findings of fact and mixed fact and law that are beyond the scope of this appeal. The parties will be limited to identifying costs that relate to general steps in the proceedings, as opposed to discrete steps in the proceedings that could have been or were the subject of interim costs orders. Once those general costs have been properly identified, the Arbitrator can assess whether to award further costs in accordance with the principles and factual findings articulated in his detailed reasons.

[34] It appears that the Arbitrator misapprehended the costs endorsement of Ferguson J. dated May 17, 2012. On the face of the Order, costs were reserved and therefore they should be addressed by the Arbitrator.

[35] The Appellant lists in her factum a number of expenses that were incurred during the process but declined by the Arbitrator. The Arbitrator’s findings in relation to these expenses are not to be revisited except to the extent of determining whether they fall within the general costs of the proceeding as contemplated by Houston v. Houston and if so, whether and to what extent they should be covered.

[36] Lastly, I leave it to the Arbitrator to decide how best to proceed with further submissions on these issues.

Costs

[37] The parties can file written costs submissions in relation to the appeal limited to 3 pages in length. The Appellant’s submissions shall be filed within 14 days of the release of this decision. The Respondent’s submissions shall be filed within 21 days. If no written submissions are filed by the parties, there shall be no Order of costs on the appeal.

[38] The appeal is allowed.

Justice J. Di Luca

Date: June 1, 2017