Court File and Parties

COURT FILE NO.: FS-19-10044 (Toronto)

DATE: 2022-07-15

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Jia Lu Lin, Yongliang Lin and Hong Yang, Applicants

AND:

Chen Wen, Respondent

BEFORE: The Honourable Mr. Justice R. A. Lococo

COUNSEL: Haiyun Wang, for the Applicants Wen Chin (Celia) Hu, for the Respondent

HEARD: By written submissions dated June 15-29, 2022

ENDORSEMENT – COSTS

I. Introduction

[1] Jia Lu Lin ("Lillian") and Chen Wen ("Vincent") are parties to family law proceedings that Lillian commenced in May 2019, following the separation of Lillian and Vincent (the "parties") earlier that year. Lillian's parents were later added as applicants in connection with Lillian's property-related claims. This endorsement addresses the costs consequences arising from a nine-day trial (followed by written closing submissions) in these proceedings.

[2] At trial, the principal issues in dispute were (i) Lillian's trust claims to three properties in Vincent's sole name (the Oakville house, the Scott St. condo and the pre-construction agreement to purchase the Front St. condo), (ii) the characterization of funds advanced by others (including both parties' parents) for property purchases, (iii) equalization of the parties' net family properties, including whether Vincent was entitled to deduct notional real estate disposition costs, and (iv) Lillian's claim for spousal support.

[3] In my Reasons for Judgment dated May 25, 2022 (reported at 2022 ONSC 3078), I made a final order that granted some of the relief that Lillian sought, adopting some of the positions taken by both parties, as outlined further below. Costs were left to be determined following written submissions.

[4] In their costs submissions, each side claims substantial indemnity costs (or, in the alternative, partial indemnity costs) against the other, as follows:

a. Lillian claims substantial indemnity costs of $106,871 or, in the alternative, partial indemnity costs of $76,631.[^1]

b. Vincent claims substantial indemnity costs of $40,801 or, in the alternative, partial indemnity costs of $27,200.[^2]

[5] Both sides take the position that as the successful party in the litigation, they should be awarded costs. In each case, they measure success based on the relief awarded, taking into account the positions the parties took at trial and offers to settle made by both sides during the litigation. Both sides say that they acted reasonably and the other side unreasonably, justifying a substantial indemnity costs award in their favour.

[6] For the reasons below, I have concluded that both sides should bear their own costs.

II. Legal principles

[7] The determination of costs is in the court's discretion: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131. Further direction relating to costs is provided by the rules that govern the conduct of court proceedings.

[8] Modern costs rules are designed to foster three fundamental purposes: (i) to partially indemnify successful litigants for the cost of litigation; (ii) to encourage settlement; and (iii) to discourage and sanction inappropriate behaviour by litigants: Serra v. Serra, 2009 ONCA 395, 66 R.F.L. (6th) 40, citing Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330 (C.A.), at para. 22.

[9] For family law proceedings, there is a presumption that a successful party is entitled to costs: Family Law Rules, O. Reg. 114/99, r. 24(1). However, a successful party who has behaved unreasonably during a case may be deprived of all or part of their own costs or ordered to pay all or part of the unsuccessful party's costs: rr. 24(4) and 24(5). If success is divided, the court may apportion costs as appropriate: r. 24(6).

[10] Consistent with r. 24(1), consideration of success is the starting point in determining costs: Sims-Howarth v. Bilcliffe (2000), 2000 CanLII 22584 (ON SC), 6 R.F.L. (5th) 430 (Ont. S.C.), at para. 1. To determine whether a party has been successful, it is appropriate for the court to consider the position each party took at trial. The court should also take into account how the trial outcome compares to any settlement offers made: Lawson v. Lawson, 2008 CanLII 23496 (Ont. S.C.), at para. 7.

[11] As a general rule, "proportionality and reasonableness are the touchstone considerations to be applied in fixing the amount of costs" in family law proceedings: see Beaver v. Hill, 2018 ONCA 840, 143 O.R. (3d) 519, at para. 12. That principle is reflected in r. 24(12)(a), which directs the court to consider the "reasonableness and proportionality" of a number of listed factors as they relate to "the importance and complexity of the issues". Those factors include (i) each party's behaviour, (ii) any written offers to settle, and (iii) legal fees and expenses.

[12] When fixing costs, r. 18(14) provides additional direction that applies where a party who makes a written offer to settle obtains an order that meets the conditions set out in that rule. Those conditions include requirements that (i) the offer does not expire and is not withdrawn before the trial starts, and (ii) the offering party obtains a result that is "as favourable as or more favourable than the offer." If the conditions are met, the offering party is "entitled to costs to the date the offer was served and full recovery of costs from that date". When fixing costs, the court may take into account any written offer to settle, whether or not r. 18(14) applies: see r. 18(16).

III. Analysis

[13] In order to assess both parties' claim to be the successful (or more successful) party, it is helpful to summarize the key determinations made in the Reasons for Decision.

[14] In the final order, Lillian was awarded (i) an equalization payment of $72,080.16 (comparable to the amount Vincent said was due to her – Lillian claimed over $700,000), (ii) lump-sum spousal support of $26,864, and (iii) a 50 percent interest in the pre-construction Front Street condo.[^3] As well, I ordered Vincent to pay $184,453.80 to Lillian's parents as a loan repayment. In doing so, I made the following determinations on the four principal issues in dispute outlined previously.

[15] On the first issue (Lillian's property trust claims), I dismissed Lillian's claim for a 50 per cent interest in the two more valuable properties (the Oakville house and the Scott St. condo) but granted her claim for a 50 per cent interest in the third property, the pre-construction Front St. condo.

[16] On the second issue (characterization of funds advanced by others for property purchases),

a. I accepted Vincent's position that a $219,900 advance from Vincent's parents to fund the purchase of the Oakville house was a gift to Vincent rather than a loan to both parties (as Lillian argued),

b. I rejected Vincent's position that a $171,100 advance from a friend of Lillian's parents to fund the purchase of the Scott St. condo was a gift to Vincent, finding instead that it was a loan to Vincent (rather than a loan to both Vincent and Lillian, as Lillian argued),

c. I accepted Vincent's position that funding of $45,953.80 from Lillian's parents for the Scott Street condo was a loan to Vincent alone (rather than a loan to Vincent and Lillian jointly, as Lillian argued), and

d. I accepted Lillian's position that a $27,000 advance from Lillian's parents to fund the purchase of the Front Street condo was a loan to Vincent and Lillian jointly (rather than a loan to Vincent alone, as Vincent argued).

[17] On the third issue (equalization), I accepted Vincent's position that he was entitled to deduct notional real estate disposition costs when calculating his net family property, rejecting Lillian's position that Vincent had not established that property dispositions were necessary. However, I allowed deduction of only half of the amount Vincent proposed, thereby accepting the alternative position both parties took on this issue. As well, in addition to my findings on Lillian's trust claims and characterization of third-party fund advances, I made the additional key determination that Lillian was not entitled to an unequal division of net family under s. 5(6) of the Family Law Act, R.S.O. 1990, c. F-3, as Lillian argued in her closing submissions.

[18] On the fourth issue (spousal support), I found that Lillian was entitled to spousal support from Vincent, contrary to Vincent's position. I awarded her the lump sum amount of $26,864, rather than the amount she requested ($31,390).

[19] Based on the foregoing, measuring each party's degree of overall success by comparing the result achieved to the parties' position at trial, it is difficult to see how either party could reasonably claim to be the successful (or the more successful) party. The issues were many and often complex. On an overall basis, their resolution did not easily lend itself to characterization as success or failure for one side or the other. In their costs submissions, the parties attempt to justify their claim of overall success by emphasizing instances where findings were made in their favour, while unduly minimizing or ignoring findings made in favour of the other side. In my view, the best that either party is reasonably able to claim is that success was divided.

[20] My assessment of the parties' degree of success does not change when I take into account the offers to settle that were provided with the parties' submissions.

[21] By way of background, the parties provided me with a total of five offers to settle (two from Lillian and three from Vincent) made at various times between November 2019 and October 2021. The offers were at times complex (in particular, an offer by Vincent provide four different comprehensive options for an overall settlement). None of the offers met the conditions that would have entitled an offering party to full indemnity costs under r. 18 (neither party claimed that they did). None of the offers were still in effect when the trial commenced (one of Lillian's offers was open for only one day before it was withdrawn). Neither party was able to persuasively demonstrate that the result at trial was as favourable or more favourable than the terms of one of the offers, although the result was arguably close in some cases. However, whether or not an offer meets the conditions in r. 18, I am entitled to take the offer into account when determining costs: see rr. 24(12)(a)(iii) and 18(16).

[22] Having considered the terms of the above offers to settle, I am not persuaded they have any material effect on my assessment of the parties' degree of success in the litigation. As well, contrary to each side's submissions about the other, I am not satisfied that the conduct of either side was so unreasonable that it should result in adverse costs consequences.

[23] In Vincent's costs submissions, he also argues that it was unreasonable for Lillian to amend her application on the eve of trial to advance the trust claims against the three properties in his name alone. In her reply submissions, Lillian disputes that position, relying on para. 119 of my Reasons for Judgment, in which I declined to draw an adverse inference arising from the late pleading amendment.

[24] I would not be so quick to dismiss out of hand Vincent's submissions on that point. In para. 119, I declined to draw an adverse inference from the late pleading amendment when considering whether Lillian has a trust interest in the pre-construction Front St. condo. However, in my view, the fact that I did not do so does not preclude Vincent from arguing that there should be adverse cost consequences based on the timing of the pleading amendment.

[25] As noted in Vincent's submissions, Lillian's trust claim raised complex issues. An earlier amendment would have allowed resolution discussions of that issue at a case conference, settlement conference or other negotiation. The parties were in fact able to agree on certain factual matters (including property valuations), which doubtless reduced trial time. However, they were unable to agree on other key substantive issues, which had to be resolved at trial.

[26] In the end, I am not persuaded that an earlier pleading amendment would likely have resulted in the issue being resolved without a trial. I also note that the absence of a trust claim earlier in the proceedings did not deter the parties from proposing property transfers to Lillian as an element of offers to settle between the parties. In these circumstances, I do not consider it appropriate that Lillian's late pleading amendment should result in negative costs consequences in this case.

IV. Conclusion

[27] In summary, I conclude that the trial in these proceedings resulted in divided success. I do not consider it appropriate to characterize one side as being more successful than the other. As well, I am not persuaded that either side should suffer adverse costs consequences as a result of unreasonable conduct. In these circumstances, I find that each side should bear their own costs.

R. A. Lococo J.

Released: July 15, 2022

[^1]: Lillian calculated substantial indemnity costs as 90 per cent of actual costs and partial indemnity costs as 60 per cent of actual costs. In each case, the amount claimed includes disbursements of $16,152 on a full recovery basis.

[^2]: Vincent calculated substantial indemnity costs as 60 per cent of actual costs and partial indemnity costs as 40 per cent of actual costs. In each case, the amount claimed includes the corresponding proportion of disbursements, the actual disbursements amount being $18,849.

[^3]: Lillian's costs submissions state that the value of her interest in the preconstruction Front St. condo is $115,805, without explaining how that amount is calculated.