COURT FILE NO.: FS-18-00040945
DATE: 2021-08-11
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Teresa DeSantis, Applicant
AND:
Gavin Hood, Respondent
BEFORE: Kurz J.
COUNSEL: C. Vandeputte for the Applicant
S. Bruce for the Respondent
HEARD: July 26, 2021
Costs ENDORSEMENT
[1] With the assistance of Justice Coats, the parties settled this proceeding prior to the commencement of trial before me. My endorsement of April 14, 2021, provided the parties with directions for the filing of briefs regarding the determination of costs. As Ms. Bruce requested the right to make oral arguments, I granted leave to the parties to make brief oral submissions as well.
[2] I have now received the written submissions of the parties and heard their oral submissions of July 26, 2021.The Applicant, Dr. DeSantis, claims costs of $340,000, based on a bill of costs of $640,000. She argues that she is entitled to that exceptional amount of costs on the basis of what she describes as :
a. Substantial success on a severable offer to settle as to the parenting issues, and
b. Recovery for unnecessary expenses incurred due to the Respondent’s failure to provide adequate and timely disclosure.
[3] Mr. Hood argues that in light of the settlement, the split custody arrangement, and the compromises involved in the ultimate resolution, no costs should be awarded. He also points out that the costs, both incurred and claimed by Dr. DeSantis are about three times higher than his costs. His states that his solicitor and own client costs are approximately $200,000 and that if he were to seek costs the amount that he would seek would be $100,000.
Applicable Legal Principles
[4] I set out below what I understand to be the applicable legal principles that apply to the determination of costs in a proceeding. Many of my comments have been set out in my previous decisions, including Spadacini-Kelava v. Kelava, 2021 ONSC 2490. To them I add references to the law regarding the determination of costs after the parties settle a proceeding.
Jurisdiction to Award Costs
[5] The jurisdiction of this court to award costs arises from s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. That provision gives the court broad discretion to determine costs.
[6] Under r. 24(10)(a), courts are required “[p]romptly after dealing with a step in a case” to determine “in a summary manner … who if anyone, is entitled to costs in relation to that step and set the amount of any costs”. In the alternative, the court may “expressly reserve the decision on costs for determination at a later stage of the case”: r. 24(10(b). However the failure to make a decision under r. 24(10) does not prevent the court from making an award of costs in relation to a step at a later stage of the case”: r. 24(11).
General Costs Principles
[7] As the Ontario Court of Appeal for Ontario noted in Serra v. Serra, 2009 ONCA 105, [2009] O.J. No. 432 (Ont. C.A.), at para. 8:
Modern costs rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.
[8] In Shute v. Shute, [2017] O.J. No. 4110, Justice Victoria Starr of the Ontario Court of Justice supplemented Serra's three costs purposes by offering a fourth that applies in family law proceedings: ensuring that the primary objective of the Family Law Rules ("FLR"), dealing with cases justly, is met. Starr J. wrote:
29 Subrule 2(2) of the Rules adds a fourth fundamental purpose for costs: to ensure that the primary objective of the Rules is met -- that cases are dealt with justly. This provision needs to be read in conjunction with Rule 24 of the Rules. Subrule 2(4) of the Rules states that parties have a positive obligation to help the court to promote the primary objective under the Rules. Clauses 2(3)(a) and (b) of the Rules set out that dealing with a case justly includes ensuring that the procedure is fair to all parties and saving time and expense. [See: Sambasivam v. Pulendrarajah, 2012 ONCJ 711].
[9] That finding was echoed by the Court of Appeal for Ontario in Mattina v. Mattina, 2018 ONCA 867, at para. 10, citing Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330 (Ont. C.A.), at para. 22.
[10] To those factors, Chappel J. of this court’s Family Court add that “courts must also ensure that the law of costs does not become an impediment to the pursuit of justice… the court should also consider the importance of not unduly deterring potential litigants from pursuing legitimate claims for fear of overly burdensome costs consequences”: Weber v. Weber, 2020 ONSC 6855, at para. 11.
[11] In Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634 (Ont. C.A.) ("Boucher"), at para. 24, the Court of Appeal for Ontario concluded that costs awards should reflect "what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties."
[12] In Beaver v. Hill, 2018 ONCA 840, at para. 10, the Court of Appeal for Ontario clarified that proportionality and reasonableness, the two key factors set out in r. 24(12)(a), are the touchstone considerations to be applied in fixing the amount of costs in family law matters.
De-Emphasis on Counsel's Hourly Rates and Time Spent
[13] In Delellis v. Delellis, 2005 CanLII 36447 (ON SC), [2005] O.J. No. 4345 (S.C.J.), Justice David Aston of this court noted the emphasis on setting a "fair and reasonable" amount of costs that emerges from Boucher and the cases following it. Aston J. found that this approach has led to a de-emphasis on hourly rates and time spent by counsel as the key factor in fixing costs. He continued at para. 9:
...Costs must be proportional to the amount in issue and the outcome. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful litigant.
[Citations omitted]
Scale of Costs
[14] In deciding costs in family law proceedings, judges are not constrained by the normal scale of costs found in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The court may increase or decrease what would ordinarily be an appropriate amount of costs based on the behaviour of the parties and the presence of absence of offers to settle (Beaver v. Hill, at para. 9).
Party Status does not Grant a License to Litigate Oblivious to the Consequences
[15] The right to bring or respond to a case does not grant either party a license to litigate in a manner that ignores the consequence of that litigation. Justice Carole Curtis of the Ontario Court of Justice emphasized this point in Sabo v. Sabo, [2013] O.J. No. 4628 (O.C.J.), as follows at para. 38:
Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly for the purposes of this case, oblivious to the mounting costs of the litigation...
Unaccepted Offers to Settle
[16] Rule 18 deals with offers to settle. Rule 18(1) defines the term “offer” as “an offer to settle one or more claims in a case, motion, appeal or enforcement, and includes a counter-offer.” Although r. 18(1) does not explicitly define an offer as being one in writing, the rule implicitly imposes that requirement. For example, an offer under r. 18 must be signed personally by the party making the offer and by their lawyer, if any: r. 18(2).
[17] The terms of r. 18 apply even to an offer made before the case has started: r. 18(2).
[18] Sub-rules 18 (14) - (16) deal with the cost consequences of unaccepted offers to settle. They state:
COSTS CONSEQUENCES OF FAILURE TO ACCEPT OFFER
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:
If the offer relates to a motion, it is made at least one day before the motion date.
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.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
COSTS CONSEQUENCES -- BURDEN OF PROOF
- The burden of proving that the order is as favourable as or more favourable than the offer to settle is on the party who claims the benefit of subrule (14).
COSTS -- DISCRETION OF COURT
- When the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms, even if subrule (14) does not apply.
[19] Rule 18(14) requires a party to meet strict requirements regarding offers if they wish to take advantage of the opportunity to obtain full indemnity costs for the period after the offer is made.
[20] In Jackson v. Mayerle, 2016 ONSC 1556, Pazaratz J. considered the requirements for an order under r. 18(14). In order to determine whether a party has obtained a result "as favourable as or more favourable than the offer", the court need not compare the offer and the result with microscopic precision. Rather, as Pazaratz J. stated at para. 47:
To trigger full recovery costs a party must do as well or better than all the terms of any offer (or a severable section of an offer) ... The court is not required to examine each term of the offer as compared to the terms of the order and weigh with microscopic precision the equivalence of the terms. What is required is a general assessment of the overall comparability of the offer as contrasted with the order... [Citations omitted].
[21] Rule 18(16), is r. 18’s basket clause for offers that may attract costs consequences. Covering “any written offer to settle”, r.18(16) allows the court broad discretion regarding costs, even when the requirements of r. 18(14) are not met. But despite its broad discretionary nature, nothing in the wording of r. 18(16) obviates the requirement that an unaccepted offer must meet the r. 18 formal requirements in order to attract costs consequences.
[22] All of that said, as Lemon J. pointed out in Slongo v Slongo, 2015 ONSC 3327 (S.C.J.), (rev'd. on other grounds, 2017 ONCA 272), r. 18(14) does not require the presiding justice to allow the successful party to demand a blank cheque for his costs. The principle implicitly applies to r. 18(16) as well.
Rule 24 Factors
[23] FLR r. 24 sets out the factors that the court must consider in the exercise of its discretion regarding costs. However the court retains its ultimate discretion to determine what costs are reasonable (C.A.M. v. D.M., [2003] O.J. No. 3707, 2003 CanLII 18880 (Ont. C.A.), at para. 43).
[24] The starting point, found in r. 24(1), is that the successful party is presumptively entitled to the costs of a motion, enforcement, case or appeal (see also Beaver v. Hill and Berta v. Berta, 2015 ONCA 918). But as Rosenberg J.A. stated in C.A.M. v. D.M., at para. 41, that provision does not completely remove the court's discretion to refuse to grant costs to the successful party.
[25] Further, as the Court of Appeal for Ontario stated in Beaver v. Hill, there is no presumption that the successful party in a family law proceeding is entitled to an amount approaching full or even substantial indemnity costs. The exceptions to that principle are bad faith (r. 24(8)) or besting an offer to settle (r. 18(14)), which can allow enhanced costs up to the point of full indemnity (see paras. 11 and 13).
[26] Further, a party may obtain enhanced costs if the party’s conduct of the litigation, including his or her legal position, was unreasonable: Climans v. Latner, 2020 ONCA 554, at para. 92.
[27] While r. 18 deals with offers to settle and the consequences of their acceptance or rejection, r. 24 also looks to offers to settle as an important element in the determination of costs. It does so as a factor for determining the reasonableness and proportionality of a party’s conduct in the litigation.
[28] In sum, a court determining costs may consider an unaccepted offer in two different ways. First, it may consider the offer in comparison to the result of the litigation. In that case, the offer must meet r. 18’s formal requirements. Second, the court may also consider the offer as part of its consideration of the reasonableness of each party’s conduct in the litigation.
[29] Subrule 24(12) sets out the appropriate considerations in fixing the quantum of costs. It reads:
(12) In setting the amount of costs, the court shall consider,
(a) the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues:
i. each party's behaviour,
ii. the time spent by each party,
iii. any written offers to settle, including offers that do not meet the requirements of rule 18,
iv. any legal fees, including the number of lawyers and their rates,
v. any expert witness fees, including the number of experts and their rates,
vi. any other expenses properly paid or payable; and
(b) any other relevant matter.
Reasonable or Unreasonable Behaviour
[30] As set out above, reasonable litigation behaviour is a touchstone of the costs determination process. That point is made clear by r. 24(4), which allows the court to deprive a successful party of all or some of their costs if they have behaved unreasonably. In fact, such a party may be ordered to pay some or all of the costs of the unsuccessful party.
[31] Under r. 24(5), when the court looks to the reasonableness or unreasonableness of each party's behaviour during the course of the dispute, the following considerations apply:
a. the party's behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;
b. the reasonableness of any offer the party made; and
c. any offer the party withdrew or failed to accept.
[32] In Weber v. Weber, above, Chappel J. explains at para. 15 the reasons for the centrality of reasonable behaviour in the assessment of costs as follows:
One of the most important functions of costs is to ensure that litigants conduct themselves in a manner that upholds the integrity of our justice system as a whole. Costs awards are a means of ensuring that litigation is not utilized as a tool to harass parties, that it is conducted in an organized and responsible manner and that the resources of the justice system are not unduly drained by clearly unreasonable claims.
[33] Chappel J. adopts this trenchant statement of Spence J. of the Ontario Court of Justice in Heuss v. Surkos 2004 ONCJ 141 (Ont. C.J.), at para. 20, about the need for prudence in conducting potentially costly litigation:
Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly for the purposes of this case, oblivious to the mounting costs of the litigation. Matrimonial litigation is an occasion for sober consideration and thoughtfulness rather than intemperate behaviour.
Offers to Settle as a Factor in Determining Reasonable Behaviour
[34] In Serra, cited above, the Court of Appeal for Ontario emphasized the obligation to attempt to settle that arises from the very beginning of a family law case. In doing so, the court adopted the following statement by Spence J. in Husein v. Chatoor, 2005 ONCJ 487, [2005] O.J. No. 5715 (Ont. C.J.), at para. 30:
[P]arties have an obligation to begin to assess their respective cases at the outset of the litigation -- even before the litigation commences -- and to make all reasonable efforts to settle. Legal fees can create enormous financial burdens for litigants and it behoves neither party simply to sit back and to roll the dice while those fees continue to mount.
[Emphasis added by Court of Appeal for Ontario]
[35] In J.V.M. v. F.D.P., 2011 ONCJ 616, [2011] O.J. No. 5441 (Ont. C.J.), Sherr J. equated the failure to make an offer to settle to unreasonable behaviour under Rule 24(5) and (12). He stated at para. 5:
The failure to make an offer to settle much earlier [than trial] by either party is unreasonable behaviour. Subrule 2(4) imposes a duty on parties and their lawyers to promote the primary objective of the rules to deal with cases justly (subrule 2(2)). This includes taking appropriate steps to save time and expense (subrule 2(3)). Offers to settle play an important role in saving time and expense by promoting settlements, focusing parties and often narrowing issues in dispute. See Laing v. Mahmoud, 2011 ONSC 6737, [2011] O.J. No. 5134, 2011 CarswellOnt 12972 (Ont. Fam. Ct.). The failure to serve an offer to settle will be an adverse factor when assessing costs.
[36] However, in Beaver v. Hill, the Ontario Court of Appeal offered a note of caution about excessive reliance on offers to settle in determining costs when the provisions of r. 18(14) are not engaged. The service of an offer to settle may not, in itself, be sufficient to claim reasonable behaviour. The offer must contain what Nordheimer J.A., writing for the court, described at para. 16 as "... a true element of compromise." Even so:
... judges should be very cautious about relying too heavily on this factor to increase or decrease the quantum of costs, when the specific Rules regarding such offers are not directly engaged. Even under r. 24(5)(a) of the Family Law Rules, it is but one factor that is to be considered.
How is Success Measured Within the Context of Divided Success?
[37] When success is divided, the court has the explicit discretion under r. 24 (6) to determine the allocation of costs. One key issue under r. 14(6) is how to allocate success when neither party is the clear winner of a motion, trial or other proceeding.
[38] In Jackson v. Mayerle, 2016 ONSC 1556 (SCJ-FC), Pazaratz J. of this court’s Family Court looked at how to apportion divided success under r. 24(6). He stated that r. 24(6) requires a comparative analysis, as most family cases have multiple issues. However, those issues are not equally important, time-consuming or expensive to determine. Comparative success can also be assessed globally in relation to the whole of the case, asking:
a. How many issues were there?
b. How did the issues compare in terms of importance, complexity and time expended?
c. Was either party predominantly successful on more of the issues?
d. Was either party more responsible for unnecessary legal costs being incurred?
[39] In Thompson v. Drummond, 2018 ONSC 4762, Chappel J. added to Pazaratz J.’s analysis. She pointed out that the determination of success is not merely a mathematical exercise. Rather, the court must engage in a "contextual analysis" in which it looks first to the kinds of factors set out in Jackson v. Mayerle. If it finds that success is divided, the court will then exercise its discretion. It may simply determine costs globally. Or it may look first to success in the primary issue, but subject to "adjustments" that consider lack of success in any secondary issues, as well as any other appropriate factors. As Chappel J. wrote at para. 12:
The determination of whether success was truly "divided" does not simply involve adding up the number of issues and running a mathematical tally of which party won more of them ... Rather, it requires a contextual analysis that takes into consideration the importance of the issues that were litigated and the amount of time and expense that were devoted to the issues which required adjudication ... Where the court concludes that success was in fact divided, it may award costs to the party who was more successful on an overall global basis or on the primary issue, subject to adjustments that it considers appropriate having regard for the lack of success on secondary issues and any other factors relating to the litigation history of the case ...
[Citation omitted]
The Role of Offers to Settle in the Determination of Success Under Rule 24
[40] There are two schools of thought regarding the role of offers to settle in the determination of success under r. 24. On the one hand, in Lawson v. Lawson, 2008 CanLII 23496 (ON SC), [2008] O.J. No. 1978 (S.C.J.), Justice J. Wilma Scott of this court’s Family Court wrote that any determination of success "...must take into account how that order compares to any settlement offers made": at para. 7. In Osmar v. Osmar, 2000 CanLII 20380 (ON SC), [2000] O.J. No. 2504 (S.C.J.), at para. 7, Aston J. was even more direct, in stating that:
Offers to settle become the yardstick by which to measure "success" and are significant in considering both liability for costs and the amount of those costs.
[41] On the other hand, in Jackson v. Mayerle, Pazaratz J. considered offers to settle separately from the issue of relative success. His four factors do not include success in comparison to offers to settle. Similarly, Chappel J.'s analysis of divided success in Thompson v. Drummond did not consider offers to settle. Rather, elsewhere in her decision, she describes offers as "[a]nother important consideration in determining both entitlement to and the quantum of costs."
[42] In Lazare v Heitner, 2018 ONSC 4861, McGee J. clearly planted her flag on the side of the relief sought in the case rather than any offer. She wrote at para. 16:
A comparison of what was sought in the litigation, rather than within the Offers must be the primary Rule 24(6) (divided success) analysis if I am to give effect to the purposes of costs award: to partially indemnify successful litigants for the cost of litigation, to encourage settlement and to discourage and sanction inappropriate behaviour by litigants. To do otherwise is to encourage all in, or all out litigation; or in other words, the all too familiar "accept my terms or I'll fight you on everything."
[Footnote omitted]
[43] While there are merits to each approach, I accept the one explicitly adopted by McGee J. and implicitly adopted by Pazaratz J. and Chappel J. I say so for four reasons.
[44] First, r. 24(6), like r. 24(1) specifically looks only to a result: "success". The term, success, is defined by the Oxford Canadian Dictionary, Barber ed., 1998, as "1 The accomplishment of an aim; a favourable outcome..." That is the sense in which it is used in the two subrules: the "accomplishment", the "outcome" of the proceeding, rather than the process leading to the result.
[45] Second, r. 18, which is devoted to the making, acceptance and consequences of written offers to settle, makes no reference to the term, success. Rather, the rule relies on a different term of comparison, favourability. Under r. 18(14)(5), when dealing with the costs consequences of unaccepted offers, the court is directed to consider whether the ultimate order is "as favourable as or more favourable than the offer". In other words, the court is required to compare the ultimate order to the offer, not to what the other party originally tried to achieve. Favourability is a factor that applies to costs only in the context of a r. 18 offer.
[46] Even when r. 18(16) grants the court the broad right to consider any written offer to settle in its exercise of discretion over costs, it makes no reference to success.
[47] Third, the link between the r. 24 costs factors and those which arise from r. 18 is found in r. 24(5) and r. 24(12), both of which refer to offers in the context of "reasonableness", not success.
[48] Under r. 24(5)(a) and (b), a court can rely on whether a party made an offer to settle as well as the "reasonableness" of any such offer in deciding whether the party acted reasonably or unreasonably. The fact of making an offer is part of a consideration of “the party’s behaviour in relation to the issues from the time they arose”. There is no reference in r. 24(5) to the requirement that an offer be in writing. In r. 24(5)(b) and (c), the rule looks to “any offer” the party “made”, “withdrew or failed to accept”.
[49] Rule 24(12)(a) looks to "the reasonableness and proportionality" of a series of factors as they relate "to the importance and complexity of the issues" in a proceeding. One of those factors, under r. 24(12)(a)(iii), is "any written offers to settle, including offers that do not meet the requirements of rule 18".
[50] In sum, offers to settle are imported into r. 24 only in regard to reasonableness and/or proportionality, not success. Further, while those offers need to be in writing, they do not have to meet the formal requirements of r. 18 in order to be considered under r. 24(12).
[51] On the other hand, r. 24(4) offers a dividing line between success and reasonableness. It allows the court to deprive "a successful party" of all or part of their costs if they have "behaved unreasonably during a case". Clearly r. 24 treats success and reasonableness as separate concepts.
[52] Fourth, on a practical basis, often one or both parties have not made an offer to settle. While the failure to make an offer to settle may be considered unreasonable conduct (see J.V.M. v. F.D.P., above and r. 24(5)(a)), it is not mandatory that a party make an offer. The failure to do so is not relevant to the determination of success under r. 24(1),(4) or (6).
[53] In conclusion on the place of offers to settle in the determination of success, the FLR's costs rules offer a number of routes to the determination of costs. One of them is through favourable offers to settle and another is through success. The scheme under r. 18 compares the ultimate order to the offers that precede it, seen through the lens of favourability to the offeror. On the other hand, r. 24(1), (4) and (6) looks to success by comparing the result to the relief that each party sought. Where r. 24 looks to offers, it does so only in order to determine reasonableness and proportionality, not relative success. Thus, offers to settle are not a factor in the determination of success in a proceeding.
Determining Costs After Settlement
[54] Costs of a proceeding may be awarded to a party despite the fact that a case has settled: Talbot v Talbot, 2016 ONSC 1351. However, as Templeton J. pointed out in Talbot, a judge called upon to decide the costs of steps which led to settlement, but which they did not adjudicate, for which costs have not been decided, is at a great disadvantage. That judge must, in accord with r. 24(10) decide those costs in a “summary manner”, even though those costs had not previously been decided “’[p]romptly after dealing with [the] step in a case” in question.
[55] The post-settlement judge has far less ability to determine issues relevant to costs, such as success, favourability and reasonable or unreasonable behavior than a judge adjudicating each step at the time it occurs. That is why courts in those circumstances should be reluctant to award of costs against one of two settling parties.
[56] In Talbot, Templeton J. adopts the following explanation for a diffident approach to post settlement costs awards previously offered by Leach J. in Witherspoon v Witherspoon, 2015 ONSC 6378. Speaking of the unique challenges of determining costs after the fact for steps that led to the settlement of family law proceeding, Leach J. wrote:
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.
[57] Leach J. concluded that “[f]or 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…”
[58] In Davis v. Fell, 2016 ONCJ 84, O’Connell J. agreed at para. 28 with Leach’s J.’s notion that, “[u]nless there are compelling reasons to do so, costs in the circumstances of the settlement between parties ought not to be awarded by the court.” She added at para. 29 that when the court feels able to determine success based on the parties’ offers, “the divided success approach under Rule 24(6) is appropriate, and a consideration of the parties' reasonable or unreasonable behaviour must be made”.
Difficulties in Determining Costs in This Case
[59] I agree with Justices O’Connell, Leach and Templeton regarding the difficulty of determining costs in circumstances such as these in that I am called upon to make a summary determination of a claim to over $300,000 based only on brief written and oral submissions. I have heard lengthy trials where far less money is at stake.
[60] This case is a perfect illustration of the difficulties inherent in an after-the-fact determination of the costs of proceedings that were never argued before me or in large measure, at all. Even the disclosure issues, upon which Dr. DeSantis pins so much of her argument, were settled without adverse findings relevant to costs being made.
[61] Accordingly, before determining whether either party is entitled to costs and if so, in what amount, I will review each issue in this proceeding within the context of success, favourability, reasonable conduct and proportionality.
Parenting Arrangements
[62] The parenting arrangements in this proceeding evolved and modified over time. Dr. DeSantis originally sought sole custody of both children and then the right to move with them to Strathroy, Ontario. She argued that Mr. Hood is abusive, particularly towards the parties’ oldest child, O. However the ultimate parenting arrangements to which she agreed called for a split parenting arrangement. O is in Mr. Hood’s primary care, with Dr. DeSantis’ parenting time to be determined between herself and O. J is in Dr. DeSantis’ primary care. But she has parenting time with Mr. Hood three weekends per month, long weekends, half summers and other holidays. The mother’s move to Strathroy was agreed upon just prior to the scheduled date for trial. That agreement followed an update of Wendy McKenzie’s original s. 30 assessment, which demonstrated the child’s desire to move to Strathroy. The father says that the child was previously more ambivalent about the move.
[63] Mr. Hood points out that Dr. DeSantis’ offer of January 29, 2021 only called for alternate weekend parenting time for J and a statement that O had withdrawn from parental control (one that is not part of the final agreement). Mr. Hood’s October 20, 2020 offer called for shared parenting of J and O in his primary care. The offer required the mother to reside within 10 km of Burlington. Compared to both their original positions and their offers, the results seem to be to be evenly divided, if not slightly more favourable to Mr. Hood.
[64] Yet Dr. DeSantis seeks costs of $70,000 for the parenting issues, arguing that her actual costs were $100,000, with $40,000 incurred after her January 29, 2021 offer. Her written submissions do not set out why she should be entitled to any costs on the parenting issue.
Child Support
[65] Regarding child support, in both her application and amended application, Dr. DeSantis sought support for both children, retroactive to the date of separation. In his answer, Mr. Hood sought support for O.
[66] Mr. Hood says that he could not accept the child support terms of Dr. DeSantis’ offer as it failed to quantify the parties’ incomes or set an amount to actually be paid.
[67] The parties agreed to an order that Mr. Hood pay Dr. DeSantis $70,675 in retroactive child support, which his counsel observed “is significantly less than the amount claimed by [Dr. DeSantis]”. They also agreed that each would pay support for one child to the other and that s. 7 expenses to be shared equally. Mr. Hood states, without contradiction, that this result is essentially a set-off. Again, success appears to be to be divided in regard to both the result and favourability, although Mr. Hood did seek child support for O in his pleadings.
Spousal Support
[68] Dr. DeSantis claimed spousal support retroactive to the date of separation and on an ongoing basis. Her January 29, 2021 offer called for indefinite term support at the high end of the range while she is disabled and continuing until she is able to earn $200,000 per year. While she did not set out all of the support arrears that she was claiming, she was looking for $120,000 for 2018 alone. Mr. Hood’s offer of January 29, 2021 called for no support and a “Miglin” spousal support release. Their compromise called for an $81,000 lump sum payment and that “Miglin” release. Once again, this appears to represent a compromise with divided success.
Equalization
[69] The equalization issue centred on the value of Mr. Hood’s shares in his former employer, ESI Technologies (“ESI”). He valued his shares in December 2019. Dr. DeSantis failed to do her own valuation but disagreed with that of Mr. Hood. For his part, Mr. Hood accepted Dr. DeSantis’ valuation of her interests in her professional corporation. Dr. DeSantis’ offer of January 29, 2021 called for her to pay an equalization payment of $50,000, to be set off against her claim for occupation rent of $144,000, resulting in a net payment to her of $94,000. Mr. Hood offered on October 30, 2020 to accept a $500,000 equalization payment with no occupation rent payment. They settled at a settlement payment of $428,058.17 by Dr. DeSantis, $71,941.83 less than Mr. Hood’s settlement offer. It is hard to see how this result left Dr. DeSantis more successful or with a more favourable result than Mr. Hood.
[70] In her written costs submission, Mr. Hood’s counsel correctly pointed out that “[i]t is entirely likely” that Dr. DeSantis spent more than $71,941.83 litigating the issue between the time of her offer and the time of settlement.
Disclosure
[71] Regarding disclosure, Dr. DeSantis says that it took over two years to obtain documents necessary to value Mr. Hood’s shares in the corporation that employed him, ESI, as well as his employment contract. She says that once he produced those records the issue was resolved.
[72] Dr. DeSantis brought three different motions for disclosure. On March 6, 2019, when Mr. Hood was ordered to produce details of his sales of shares in ESI and his employment contract. On May 30, 2019, Gray J. ordered both parties to fulfil their undertakings by June 14, 2019. Justice Gray rejected the argument on behalf Dr. DeSantis that Mr. Hood had acted in bad faith and that she should receive $33,658.62 in costs. Rather, he found that “disclosure has taken longer than it should have”. He ordered Mr. Hood to pay costs totalling $15,000 for both the motion before him and that of March 6, 2019.
[73] On January 6, 2021 Chozik heard cross motions by the parties for disclosure. She ordered Mr. Hood to provide certain financial disclosure regarding his interest in a holding company and details as to the termination of his employment. Mr. Hood asked for 30 rather than 15 days to deliver that disclosure and that it be subject to the documents being available. Chozik J. found that position to be “reasonable in the circumstances”. She also ordered, on consent, that Dr. DeSantis provide certain financial disclosure, to the extent that it has not already been disclosed. Both parties had argued before Chozik J. that “the disclosure sought had either been provided, is redundant or will be produced if available”.
[74] Chozik J. stated that Dr. DeSantis sought costs of $5,000, arguing that Mr. Hood had engaged in bad faith. Mr. Hood argued that costs be reserved to the trial judge. Chozik J found no bad faith by Mr. Hood. She observed that “[b]oth parties have expended considerable resources to deal with and argue over financial disclosure”. She explained that she was of the view that “the trial judge will be in the best position to determine whether the additional disclosure sought is of any assistance at trial”.
[75] Dr. DeSantis says that she spent $540,000 litigating financial issues, half of which, or $270,000 related to disclosure, including consultation with experts, revising her settlement position and reworking it. She asks that the court grant her $270,000 in total costs for the financial issues. Presumably half of that amount is for costs even though Gray J. determined the costs of her first two motions at $15,000 and Dr DeSantis sought only $5,000 in costs before Chozik J, on January 6, 2021.
Analysis
[76] In considering the applicable law, the offers, the ultimate resolution and all of the arguments of the parties, I conclude:
a. I cannot say that either party was the more successful one when looking to the positions set out in their pleadings;
b. Neither party made an offer that was more favourable to them than the ultimate result;
c. I see the ultimate consent order as a real compromise between the two parties’ positions and offers;
d. I see no reason to grant either party costs of the parenting issues. The parties agreed to a split parenting decision. There was truly divided success and neither party obtained a result that was more favourable than their offer. If anyone obtained the slightly more favourable result, it was the father, who not only has primary parenting of O but frequent weekend time with J.
e. There were serious issues regarding support but the mother came in high in both her pleaded position and January 29, 2021 offer, while the father came in low in both. They ultimately met somewhere in the general vicinity of the middle. The amounts that the father ultimately paid for retroactive support were far less than the mother claimed. In addition, he received a “Miglin” spousal support release.
f. Comparing the equalization result to the offers, the result was far more favourable to Mr. Hood than to Dr. DeSantis.
g. I see nothing before me that shows me that one party’s conduct was more reasonable than the conduct of the other. I considered the notion that Mr. Hood’s alleged recalcitrance regarding disclosure was unreasonable if not in bad faith and thus should attract costs consequences. However, in reviewing the endorsements of Gray J. and Chozik J. I see that both judges rejected Dr. DeSantis’ “bad faith” arguments. Moreover, the costs of the first two disclosure motions were already determined by Gray J. Dr. DeSantis sought only $5,000 for the January 6, 2021 motion before Chozik J. Nothing in the Chozik J. endorsement implies that she felt that any costs should be ordered for that motion.
h. When I compare the amounts spent on legal and professional fees against the results achieved, I see that they are out of proportion to the amounts in issue between the parties. I am reminded of the various invocations of the Court of Appeal for Ontario that costs must ultimately be amounts that are fair, reasonable and proportionate to the issues at stake.
i. Further, in considering the reasonable expectations of the parties, I see that Dr. DeSantis spent about three times as much as Mr. Hood on legal and professional fees. It is not clear to me why that is the case.
j. I also recall the comment by Leach J. that has been joined by a number of other judges. A court asked to determine the costs of a family law proceeding following a settlement “should be very slow to make an award of costs against one of the parties”. In light of the divided success manifested in the parties’ settlement, I see no compelling circumstances that would call out for a departure from that principle in this case.
[77] In considering all of those factors, I agree with Mr. Hood that there shall be no costs of this proceeding.
[78] While I have considered whether I should request submissions on the costs of the process for determining costs, I have decided that I will not do so. The written costs submissions were limited in accord with my directions. The oral arguments requested by Ms. Bruce, while well-made, revealed little that was not found in the written materials.
“Marvin Kurz J.”
Electronic signature of Justice Marvin Kurz
Date: August 11, 2021