Court File and Parties

Court File No.: FC-13-1830 Date: 2020-04-28 Ontario Superior Court of Justice

Between: Brian Gregory Nixon, Applicant – and – Catharine Linda Lumsden, Respondent

Counsel: Philip W. Augustine, for the Applicant Gregory Ste. Marie, for the Respondent

Heard: By written submissions

Costs Decision

Audet J.

[1] In December 2009, a trial was held before me in this matter over the course of seven days. In total, ten expert reports were entered into evidence to assess the value of various assets held by the parties (at various dates) as well as their respective income. I had two specific issues to decide; the equalization of the parties’ net family property and Ms. Lumsden’s claim for spousal support. I concluded that both parties had a negative net family property value and concluded that neither owed the other an equalization payment. I awarded $26,500 to Ms. Lumsden as lump sum spousal support.

[2] As the trial proceeded, it became apparent to me that this case was of very little financial value and that it should have been settled on a summary basis years ago. I wondered how, nine years after the parties’ separation following a brief marriage with no children (the second marriage for Mr. Nixon and the third for Ms. Lumsden), this matter could possibly have required a trial, let alone the kind of financial resources that both parties had necessarily invested into getting it to final adjudication. Of course, hindsight is 20\20.

[3] Having read the parties’ voluminous written submissions on costs (if inserted in the continuing record they would have filled up two large volumes), I now understand that, ultimately, costs is what drove this case to trial. Very unfortunate, but sadly, not uncommon.

[4] The parties separated in December 2010 and then tried to settle their matters without lawyers for the first year or so. They retained lawyers on or about the spring of 2012 when discussions between them broke down. Both parties were represented throughout by very experienced counsel. Through no fault of his own, Mr. Nixon had to change counsel on four occasions (counsel’s illness, retirement, etc.). This undoubtedly contributed to his somewhat larger legal bill. From 2012 up until the end of trial, Mr. Nixon paid a total of $369,675 in legal fees (inclusive of disbursements and HST). For the same period of time, Ms. Lumsden was charged a total of $214,232. Her final bill was reduced by $26,435, leaving her with a total of $187,797 to pay.

[5] While Mr. Nixon’s counsel’s bill of costs includes the time billed by his legal assistant(s), other more junior members of his firm as well as all of the fees charged by the various experts retained on his behalf throughout the years, Ms. Lumsden’s bill of costs only includes the fees charged by Mr. Ste-Marie (and no one else from his firm) and does not include any of her experts’ fees, which were paid directly to these individuals by Ms. Lumsden or third parties on her behalf. I suspect that when all those expenses are thrown in, Ms. Lumsden’s overall legal bill is not so different than Mr. Nixon’s.

[6] After settlement discussions through counsel broke down in August 2013, Mr. Nixon initiated his application. Throughout the course of this proceeding, he alternatively claimed spousal support for himself retroactive to the date of separation, the existence of a valid domestic contract entitling him to an unequal division of the parties’ net family property, a contribution from Ms. Lumsden to the carrying costs of the matrimonial home, and compensation for damages resulting from the alleged wrongful designation of one of his properties as the matrimonial home by Ms. Lumsden. Except for the later claim, which was not seriously pursued at trial, Mr. Nixon withdrew all those claims in May 2019, after the matter had been litigated for six years (and less than six months before trial).

[7] Throughout the course of this proceeding, Ms. Lumsden also made various claims which she did not pursue at trial. Among others, she claimed (or threatened to claim) damages for alleged physical assaults, unjust enrichment and occupational rent. Ultimately, only her equalization and spousal support claims were brought forward to trial.

[8] It is not disputed that at the start of trial, if Ms. Lumsden’s position on all disputed property issues prevailed, she would have been entitled to an equalization payment in the amount of $62,378. It was also not disputed that if her position prevailed on the issue of spousal support, she would have been entitled to a maximum of $70,000.

[9] It is not disputed that Mr. Nixon was the successful party at trial.

The Parties’ Position on Costs

[10] Mr. Nixon seeks costs in the amount of $279,224. In respect of property issues, he takes the position that he made an offer to settle on October 6, 2016 which would have been more favourable to Ms. Lumsden than the result she obtained at trial. He seeks partial indemnity costs to that date and substantial indemnity costs thereafter. On the issue of spousal support, he argues that he made an offer to settle on May 2, 2009, which was more favorable to Ms. Lumsden than the outcome she achieved at trial. He seeks partial indemnity costs to that date and substantial indemnity costs thereafter.

[11] Mr. Nixon claims that he attempted to resolve this matter from the outset through direct negotiations, via negotiations through counsel, and once the matter was brought to court, through formal offers to settle. He argues that Ms. Lumsden refused to settle this matter on reasonable terms, demanding a windfall settlement and refusing to take a proportional approach to litigation. He further argues that Ms. Lumsden managed her assets during this proceeding in a way that left her with only registered assets (protected from bankruptcy) at the time of trial. This, he says, has enabled her to litigate in a financially irresponsible fashion with an apparent immunity from costs consequences.

[12] Ms. Lumsden takes the position that an award of costs in the amount of $90,000 is proportional and reasonable having regard to the following factors. She states that prior to the litigation being commenced, she made a very reasonable offer to settle ($48,000) which was essentially agreed-upon by both parties, but that the settlement broke down because of additional unreasonable demands on the part of Mr. Nixon including admissions of guilt and wrongful behaviour. Once the litigation started, Ms. Lumsden states that obtaining financial disclosure from Mr. Nixon to establish his income and defeat his various claims, including for spousal support, became central. However, she says, significant resources had to be expanded to obtain the most basic disclosure from Mr. Nixon, which he failed to produce despite court orders until the very end of the litigation. This, in Ms. Lumsden’s submission, prevented her from knowing the case she had to meet and made it impossible to settle outstanding issues in a timely manner.

Legal Framework

[13] Modern costs rules are designed to foster four fundamental purposes (1) to partially indemnify successful litigants; (2) to encourage settlement, (3) to discourage and sanction inappropriate behaviour by litigants and; (4) to ensure that cases are dealt with justly under subrule 2(2) of the Family Law Rules, O. Reg. 114/99 (“the rules”) (Mattina v. Mattina, 2018 ONCA 867).

[14] Costs can be used to sanction behaviour that increases the duration and expense of litigation or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice (British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371, at para. 25).

[15] Subrule 24(1) of the rules creates a presumption of costs in favour of the successful party. Consideration of success is the starting point in determining costs (Sims-Howarth v. Bilcliffe (2000), 6 R.F.L. (5th) 430 (Ont. Sup. Ct.)(Fam. Div.). To determine whether a party has been successful, the court should take into account how the order compares to any settlement offers that were made (Lawson v. Lawson). The position each party took at trial should also be examined.

Offers to Settle

[16] It is not disputed that Mr. Nixon was the successful party at trial. As such, he is presumed entitled to his costs.

[17] The key factor at play in the determination of costs in this case is the analysis of the many offers to settle that were made by each party throughout the process considering the cost consequences set out in subrule 18 (14) of the rules, which reads as follows:

COSTS CONSEQUENCES OF FAILURE TO ACCEPT OFFER 18(14) A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:

1. If the offer relates to a motion, it is made at least one day before the motion date.
2. If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
3. The offer does not expire and is not withdrawn before the hearing starts.
4. The offer is not accepted.
5. The party who made the offer obtains an order that is as favourable as or more favourable than the offer.

[18] From the day this court application was commenced, each party made four formal offers to settle which complied with the formal requirements of rule 18. In addition, during the two years that followed their separation (before Mr. Nixon initiated this court process), they engaged in extensive negotiations with the assistance of counsel and various offers to settle were exchanged.

[19] In assessing whether or not a party behaved reasonably in a proceeding, which requires the court to assess the reasonableness of any offers the party made, withdrew or failed to accept, the court has discretion to take into account any written offer to settle, even if subrule 18(14) does not apply, when exercising its discretion over costs (subrule 18(16)).

[20] As earlier stated, both parties provided me with voluminous submissions on costs which included a detailed account of all offers to settle exchanged, formal and informal, along with the correspondence supporting settlement positions taken throughout the course of this case. The following is a summary of those settlement discussions over the course of the nine years that followed the parties’ separation.

[21] On April 11, 2012, after having registered matrimonial home designations against two properties owned by Mr. Nixon, Ms. Lumsden offered (through counsel) to settle all issues between the parties for $79,000. Upon payment, Ms. Lumsden would have removed the matrimonial home designations and mutual releases would have been exchanged. A similar offer was made by Ms. Lumsden on June 18, 2012, except that the settlement amount was reduced by $10,000 and replaced by the return of a list of personal property acquired by the parties during the relationship. The proposed settlement amount was further reduced to $50,000 by December 5, 2012, provided that a final agreement was signed, and payment made before December 20, 2012.

[22] On December 18, 2012, Mr. Nixon offered to settle all issues in the case for $48,000 ($50,000 minus a holdback of $2000 on account of fees related to the completion of the separation agreement). However, his offer was predicated upon the separation agreement including the following clauses:

• that the payment of $50,000 (less holdback of $2000) was a gratuitous payment and that there was no legal basis for it;
• that “but for the legal interference and misguided expectation of a windfall settlement” on the part of Ms. Lumsden, Mr. Nixon would have been prepared to pay a significantly higher amount;
• that Ms. Lumsden would “respect the terms of settlement, stop and desist from continuing to misrepresent her claim to entitlement, and stop slandering Mr. Nixon”;
• that failure to do so would result in legal action by Mr. Nixon;
• that Ms. Lumsden was to provide Mr. Nixon with letters bearing Ms. Lumsden’s signature or her counsel’s signature which letters were to “make clear that the designations were filed inappropriately”, and;
• that Ms. Lumsden “never had any entitlement to compensation for these properties”.

[23] On December 22, 2012, Ms. Lumsden confirmed that she agreed with the overall settlement proposal including some of the clauses listed above, but not all. It is not difficult to understand that she was not prepared to include the admissions of guilt and of inappropriate conduct demanded by Mr. Nixon, which were nothing more than an attempt to demean and humiliate her. She proposed changes and alternative language to address some of Mr. Nixon’s legitimate concerns.

[24] Mr. Nixon did not accept to deviate from his earlier position or to, in any way, alter the language of the provisions he had demanded to be included in the agreement. Mr. Nixon’s stance on this issue is well illustrated in his (then) counsel’s response on January 4, 2013 (Mr. Augustine did not represent Mr. Nixon at the time);

To be clear, Mr. Nixon does not view litigation as anything but a chance to set the record straight. As a sophisticated businessman, Mr. Nixon is, however, aware of the tertiary costs of litigation in [sic] lost time, etc. , and was therefore prepared to and did put forward a gratuitous Offer to Ms. Lumsden. That Offer is contained in our December 18, 2012, letter.

Mr. Nixon is not prepared to reconsider the conditions upon which you will settle this matter. They are clearly set out in our December 18, 2012, letter and failing your client’s acceptance of that Offer, Mr. Nixon is more than prepared to see this matter litigated.

While your letter may not have intended to convey the impression that your client’s position is one of strength, the letter does seem to suggest that she possesses some bargaining power when she does not! …

[25] Mr. Nixon’s refusal to deviate from the language he insisted be included in the agreement, or to work towards finding alternatives that would have addressed both parties’ concerns, was wholly unreasonable. His inflexible stance on this issue led to the breakdown in the parties’ negotiations, and in the seven years of litigation that followed. Ms. Lumsden was given until January 10, 2013 to accept Mr. Nixon’s proposal “exactly as set out” in his counsel’s December 18, 2012 letter, failing which he would be initiating his court application. Ms. Lumsden did not accept his offer.

[26] Mr. Nixon’s application was filed with the court in August 2013, seeking spousal support retroactive to the date of separation and the unequal division of the parties’ net family property. It took three years thereafter for the parties to exchange their first formal offers to settle. Much time and resources had already been invested in the litigation by then.

[27] On October 6, 2016, Mr. Nixon made the following formal rule 18 offer to settle:

• no equalization payment payable by either party;
• no spousal support payable by either party;
• no costs if accepted promptly.

[28] Mr. Nixon takes the position that he is entitled to substantial indemnity costs from that date on the issue of equalization since the outcome at trial was the same as what he had offered to settle that issue for. I disagree. His offer was not severable and had to be accepted in its entirety. If accepted, Ms. Lumsden would have been entitled to nothing at all, whereas at trial, she was successful in obtaining $26,500 in spousal support. In my view, nothing turns on this offer to settle, which does not trigger the cost consequences of subrule 18(14).

[29] In Ms. Lumsden’s first formal offer to settle dated December 2, 2016, she sought $162,966 to resolve property issues, $75,000 for lump-sum spousal support, pre-and post-judgment interests on these amounts, as well as partial indemnity costs for the period preceding her offer and substantial indemnity costs thereafter. This offer far exceeded what Ms. Lumsden was ultimately awarded at trial.

[30] It took three more years for the parties to make another formal offer to settle. On April 30, 2019, Ms. Lumsden made her second formal offer to settle. She sought $105,000 to settle all issues in the case, without cost consequences if accepted before May 30, 2019, and substantial indemnity costs thereafter. This offer also far exceeded the results achieved by Ms. Lumsden at trial.

[31] On May 2, 2019, Mr. Nixon made a formal rule 18 offer to settle by which he offered to pay $75,000 to settle all outstanding issues in the case. The offer was open for acceptance until May 6, 2019, on a without costs basis. If accepted after May 6, 2019, it required Ms. Lumsden to pay partial indemnity costs to the date of the offer, and full indemnity costs from the date of the offer to the date of acceptance.

[32] It is unquestionable that, if accepted by Ms. Lumsden within the four days that it was open for acceptance without costs, this offer would have been far more beneficial to her than the outcome she achieved at trial. But while this offer would have triggered the cost consequences set out in subrule 18(14) for the four days that it was open for acceptance without cost consequences, thereafter it no longer did. It is a serious risk to take, in my view, to make an offer to settle which triggers the payment of significant costs for a period preceding the date of the offer if it is not accepted within a certain timeframe.

[33] The problem with these types of offers is well illustrated in this particular case. If Mr. Nixon’s offer had not triggered costs consequences for legal fees incurred before the date of the offer, his May 2, 2019 offer to settle would have unquestionably entitled him to full recovery costs from that date on. However, because it required the payment of partial indemnity costs for all legal work completed prior to May 2, 2019 (if accepted after May 6, 2019), the offer had the potential of not being as favorable to Ms. Lumsden as the outcome she obtained at trial. In this case, if I were to deny Mr. Nixon his partial indemnity costs for the period preceding his May 2, 2019 offer to settle, which I do (for reasons set out below), his offer was no longer more favorable to Ms. Lumsden than the outcome she obtained at trial, even if the settlement amount offered ($75,000) clearly was.

[34] For that reason, I find that Mr. Nixon’s May 2, 2019 offer to settle does not trigger the cost consequences of subrule 18(14).

[35] On May 5, 2019, Ms. Lumsden offered to settle the issue of equalization only, for $42,946.89.

[36] In her fourth and final offer to settle made on November 15, 2019, Ms. Lumsden offered to settle all issues for $105,000 without cost consequences if accepted by November 19, 2019. If accepted after that date, Mr. Nixon was required to pay partial indemnity costs for the period preceding the date of the offer and costs on a full recovery basis thereafter. This offer was not only excessive, it had the same problem as Mr. Nixon’s May 2, 2019 offer to settle.

[37] On November 15, 2019, Mr. Nixon extended his fourth and final offer to settle. He proposed to settle all issues in the case for $37,500 without costs if accepted by November 20, 2019. If the offer was accepted after that date, Ms. Lumsden was required to pay full indemnity cost for any work undertaken after November 20, 2019. This offer was clearly more favorable to Ms. Lumsden than the outcome she achieved at trial and as a result, it triggers the cost consequences of subrule 18(14).

Reasonableness of the Parties

[38] I find that both parties, at times, behaved unreasonably during the course of this proceeding.

[39] Firstly, it was clear to both parties coming into this trial that the issues raised by this case were of little financial value in relation to the costs already spent by them and those associated with bringing them to trial. I have already found that Mr. Nixon’s insistence on a final settlement which included the terms set out in his counsel’s letter of December 18, 2012 was unreasonable, particularly since the parties were on the same page on all substantive terms.

[40] It is equally difficult for me to understand that Ms. Lumsden’s best offer to settle would have required Mr. Nixon to pay $105,000 when her absolute best-case scenario at the outset of the trial, if she were successful on all issues, would have resulted in Mr. Nixon paying her no more than $132,000. In fact, for Ms. Lumsden to get any equalization payment at all, her position on all disputed outstanding property issues (there were 15 of them) had to prevail. It is clear to me that her eleventh hour claim that she had lent Mr. Nixon $79,000 was a last-ditch effort to avoid what was clearly an unavoidable outcome on property issues at trial.

[41] When Mr. Nixon filed his original application in August 2013, he was seeking spousal support for himself, equalization of net family property, contribution towards the carrying costs of the matrimonial home, damages for wrongfully designating his cottage property as the matrimonial home, as well as a charging order against Ms. Lumsden’s property and her estate. Later, he alleged the existence of a valid domestic contract entitling him to an unequal division of the parties’ net family property. While none of those claims made their way to trial (they were withdrawn by Mr. Nixon on May 23, 2019), the parties were still required to incur significant costs to deal with those claims during the six years that preceded their withdrawal. It is clear to me that Mr. Nixon advanced many of those claims solely to get leverage in the litigation and in the settlement discussions. His spousal support claim, in particular, clearly had no merit at all given my findings about the parties’ respective income and in light of his asset-base. Yet, it was pursued for six years.

[42] Ms. Lumsden responded in kind by hovering her claim damages for alleged assaults over Mr. Nixon’s head, and by seeking and obtaining leave to make a claim for unjust enrichment as well as occupational rent, claims which she ultimately chose not to pursue. On the eve of trial, she filed a sworn financial statement in which she claimed (for the first time in nine years) to have lent approximately $79,000 to Mr. Nixon during the marriage. Much time, money and energy were spent on pursuing and defending those claims. Just like Mr. Nixon’s many claims which were advanced and not pursued, the claims advanced and then abandoned by Ms. Lumsden increased the time and resources needed to address them, resulted in a wider range of disclosure being required, and ultimately translated into significant wasted costs for both parties.

[43] I find that Mr. Nixon behaved unreasonably by failing to produce all relevant financial disclosure he was required to produce, considering the various claims he advanced, in a timely manner. While Mr. Nixon sought spousal support retroactive to the date of separation (December 2010), it took an order made on October 4, 2017 to force him to provide his 2014, 2015 and 2016 personal income tax returns and notices of assessment. Further disclosure orders were required in August 2018 and in December 2018 for Mr. Nixon to meet his obligation to disclose relevant financial information (particularly in light of his claim for spousal support). I find that Mr. Nixon’s failure to provide important backup documents to support his position on certain property issues (such as the national Bank receivable and information related to his business interest in Vernon, an offshore corporation) contributed, to a certain extent, to Ms. Lumsden’s inability to fully assess her position in relation to property issues. It was also a significant factor in the adjournment of the trial which was originally set to proceed during the January 2019 sittings.

[44] In the end, looking back at the history of this case, the positions taken by the parties over time, the offers to settle they each made and their overall litigation strategy and behaviour, I find that both parties over-litigated this matter and pursued claims in a manner which resulted in legal costs that were widely disproportionate to the amounts genuinely in dispute. For that reason, I find that neither is entitled to costs for the period preceding Mr. Nixon’s November 15, 2019 offer to settle.

[45] Considering the offer to the settle he made on November 15, 2019, I find that Mr. Nixon is entitled to his costs on a full recovery basis from that date.

Quantification of Costs

[46] Ms. Lumsden does not take issue with the hourly rates charged by Mr. Nixon’s counsel, or with the amount of time charged to him in relation to the work completed after November 15, 2019.

[47] Mr. Augustine was retained by Mr. Nixon on May 31, 2019. From that date to the end of the trial (including submissions on costs), Mr. Nixon was charged roughly $150,000 (inclusive of disbursements and HST but excluding expert fees). If I remove the legal fees and expenses charged prior to his November 15, 2019 offer to settle (roughly $35,000), his total legal bill for the work accomplished after the date of his offer (mainly related to trial preparation and attendance) is approximately $115,000.

[48] Mr. Nixon also incurred expert witness fees after November 15, 2019 totaling $19,266 (I have excluded fees paid to Dioguardi Law as it was not explained to me why another law firm needed to be retained or for what reason). I find Mr. Nixon is entitled to full reimbursement of those costs.

Conclusion

[49] Therefore, I conclude that Mr. Nixon is entitled to his costs fixed at $134,266 inclusive of disbursements and HST, payable by Ms. Lumsden forthwith. To the extent that Mr. Nixon has not yet paid the lump sum spousal support awarded to Ms. Lumsden, that sum may be deducted from the costs herein awarded to Mr. Nixon.

Preferential Treatment of Husband’s Claim

[50] In his submissions on costs, Mr. Nixon sought the following additional order: “To the extent that Ms. Lumsden (or parties at non-arms’ length to Ms. Lumsden) has, in preference to Mr. Nixon, paid funds to Ms. Lumsden’s legal counsel and experts since the trial in this matter, Mr. Nixon seeks an opportunity to move for an order, on reasonable notice to Ms. Lumsden, her counsel and experts, that any such payment be paid into court to be available to satisfy a costs award of this court arising from this action”.

[51] What is being sought by Mr. Nixon is unclear to me, but he seems to be claiming “preference” over payments that might have been made by Ms. Lumsden to her counsel and experts since the trial was completed. I was not provided with any legal analysis, statutory provisions or case law that would support this request. As such, it is dismissed.

Madam Justice Julie Audet Released: April 28, 2020