Court File and Parties

COURT FILE NO.: FS-23-35110 DATE: 2024-07-25 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Alistair Maxwell, Appellant AND: Jill Maxwell, Respondent

BEFORE: Madam Justice Kristjanson

COUNSEL: Aaron Franks and Adam Prewer, for the Appellant Harold Niman and Meysa Maleki, for the Respondent

HEARD: November 7, 2023

Endorsement

[1] This is an appeal from the costs award of arbitrator Alfred Mamo dated February 10, 2023, following a family law arbitration dealing primarily with retroactive and prospective spousal support. In a detailed 28-page decision, the arbitrator carefully reviewed principles relevant to costs in family decisions, including the Family Law Rules and relevant case law. He made findings of fact, applied the law to the facts, and exercised his discretion. I find that the arbitrator did not err in law, did not make any palpable and overriding errors of fact, did not err in principle in exercising his discretion, nor did he make a clearly wrong decision.

Jurisdiction

[2] The parties opted for very broad appeal rights in their arbitration agreement. Under the arbitration agreement either party may appeal a final award in accordance with section 45 of the Arbitration Act, 1991, SO 1991, c 17 (“Arbitration Act”) on a question of law without leave, on a question of fact, or on a question of mixed law and fact.

[3] Subsections 45(2) and 45(3) of the Arbitration Act provide that an appeal of a final family arbitration award lies to the Family Court (in those areas where it has jurisdiction) or otherwise to the Superior Court of Justice. Leave is not required.

[4] The court raised the issue of whether leave was required to appeal the costs award, considering the decision in Flowers v. Eickmeier, 2017 ONSC 3376. Justice Di Luca held that section 133(b) of the Courts of Justice Act requires that leave be granted where an appeal is only as to costs, and section 45 of the Arbitration Act does not specifically address the issue of leave to appeal in relation to a costs award. He found that leave was required to appeal an arbitral cost award to the court.

[5] I find that where the arbitration agreement itself does not require leave to appeal a costs award, leave is not required, largely for the reasons given by Ramsay, J. in Schickedanz v. Wagema Holdings Ltd., 2022 ONSC 5315, at paras. 12-25. Imposing a leave requirement to appeal costs amounts to judicial interference with the parties’ right to contract. It is also not consistent with the text, context, and purpose of the two governing statutes.

[6] Section 133(b) of the Courts of Justice Act applies only to courts and requires leave where the appeal is “only as to costs that are in the discretion of the court that made the order for costs.” There is no reference to appeals from arbitrators. There are detailed appeal provisions in the Arbitration Act, which allow for appeals on questions of law, fact, and mixed fact and law, all without leave if the parties agree. There is no equivalent to the restriction set out in s. 133(b) of the Courts of Justice Act. Leave is not required for costs appeals under the Arbitration Act.

Standard of Review

[7] Appellate standards of review apply to an appeal from a family arbitrator to the court pursuant to the Arbitration Act. The standard of correctness applies to questions of law in accordance with Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8. The appellate standard of review for questions of fact is palpable and overriding error (as it is for questions of mixed fact and law where the legal principle is not readily extricable): see Housen at paras. 10, 19 and 26-37.

[8] The awarding of costs by a family arbitrator is a discretionary and fact-driven decision, subject to significant deference on appeal. Appellate courts cannot interfere with a discretionary decision just because they would have reached a different conclusion. A court should only set aside a costs award on appeal if the decisionmaker made an error in principle, or the award is clearly wrong (Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 at para. 27).

[9] Mr. Maxwell has failed to first establish any errors of law, any palpable and overriding errors of fact, or that the exercise of discretion was based on wrong principles or was clearly wrong. These reasons explain why I decline to interfere with the arbitrator’s decision.

Facts

[10] The parties, who have two children, separated in September 2010 after 21 years of marriage. The parties signed a Separation Agreement dated December 23, 2011. The Settlement Agreement dealt with division of property on a final basis. The Separation Agreement required Mr. Maxwell to pay $20,000.00 per month in spousal support from January 2012 until December 31st, 2013, when spousal support was to be reviewed de novo through mediation/arbitration with the arbitrator.

[11] The parties signed a Mediation/Arbitration Agreement, and attended mediation in July 2014 with respect to the review of prospective child and spousal support effective January 1, 2014. That mediation did not result in a binding agreement. No steps were taken by either party to advance the litigation until they attended a further unsuccessful mediation in January 2021. Ms. Maxwell brought a motion for interim support returnable in February 2021. The arbitrator released his decision on interim support on April 21, 2021, which required Mr. Maxwell to pay Ms. Maxwell interim spousal support. The arbitrator determined that Ms. Maxwell was the most successful party on the interim support motion and awarded her costs.

[12] After the interim support motion, the parties attended questioning and argued an undertakings and refusals motion.

[13] The parties attended before the arbitrator to discuss the conduct of the arbitration. In February 2022 the parties agreed that they would rely on the transcript from questioning at the final arbitration, and ultimately agreed to three hours of cross-examination at the arbitration hearing.

[14] The final arbitration took place from April 18, 2022, to April 22, 2022. The parties provided their evidence in chief by way of affidavit on which they were cross-examined. The financial experts were also cross-examined. The arbitrator released his arbitration award on August 30, 2022. Mr. Maxwell requested a clarification as to a calculation, and the arbitrator released the addendum to his arbitral award on October 7, 2022.

[15] In his arbitral award on the substantive issues, the arbitrator awarded the following:

(a) Spousal support to be paid to Ms. Maxwell commencing January 1, 2022, to be set at $32,000.00 per month. (b) Retroactive spousal support in the amount of $504,782.00 with Mr. Maxwell to receive credit for the $125,000.00 in advances already paid for a total of $379,782.00, to be paid by October 15, 2022. (c) No retroactive child support. (d) Mr. Maxwell was ordered to designate a trustee to be the beneficiary of his life insurance policies and to hold them in trust upon his death. (e) No indexing of spousal support.

Costs Award

[16] The arbitrator released his costs award on February 10, 2023. It is this costs decision that is the subject of this appeal. The arbitrator ordered Mr. Maxwell to pay Ms. Maxwell $78,000.00 in costs.

[17] Both parties took the position that they had been the most successful. Ms. Maxwell sought costs of the review in the total sum of $343,682, inclusive of disbursements, for the period between January 1, 2014, and the award. Ms. Maxwell also sought partial recovery costs in connection with the undertakings/disclosure motion in the amount of $8,462.49, and $4,878.37 with respect to the reconsideration request by Mr. Maxwell after the release of the final Award. Mr. Maxwell's position was that he was entitled to costs payable by Ms. Maxwell to him in the sum of $208,989.

[18] The arbitrator’s costs decision is 28 single-spaced pages. He thoroughly reviewed the legal principles applicable to a costs award under the Family Law Rules and jurisprudence, and applied the legal principles to the facts before him.

[19] The arbitrator correctly identified the relevant legal framework, that under Rule 24:

(a) the successful party is presumed to be entitled to costs, (b) a successful party who has behaved unreasonably may be deprived of all or part of their costs, (c) in deciding whether a party has behaved unreasonably or not, the decisionmaker looks to the party's behaviour, including whether that party made an offer, as well as the reasonableness of any offer withdrawn or that the opposing parties failed to accept, and (d) where success is divided, the court has the discretion to apportion costs as might be appropriate. (Rule 24(6) and Fielding v Fielding, 2015 ONCA 901, para. 66).

[20] The arbitrator correctly identified the purposes of costs awards under the Family Law Rules, summarized by the Ontario Court of Appeal in the case of Mattina v Mattina, 2018 ONCA 867, as (i) to indemnify successful litigants for the cost of litigation, (ii) to encourage settlement and (iii) to discourage and sanction inappropriate behaviour by litigants. The arbitrator also identified two other important considerations in setting costs, which he summarized as follows:

(i) That the courts must also ensure that the law of costs does not become an impediment to the pursuit of justice. Accordingly, in seeking to advance these objectives, the court should also consider the importance of not unduly deterring potential litigants from pursuing legitimate claims for fear of overly burdensome cost consequences (Cassidy v Cassidy, 2011 ONSC 1541; Thompson v Drummond, 2018 ONSC 4762, para 9), and (ii) That Rule 2(2) of the Family Law Rules adds another 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: Sambasivam v Pulendrarajah, 2012 ONCJ 711; Lawrence v Lawrence, 2017 ONCJ 431, at para. 28.

[21] The arbitrator then turned to the costs consequences of offers to settle under Rule 18. Each party delivered one offer to settle, mere days before the hearing. Both offers were non-severable. The arbitrator also considered the draft awards filed at the hearing.

[22] The arbitrator identified the following issues relevant to his costs determination, and carefully analyzed these issues:

(a) Who was the successful party and why? (b) Did either party behave unreasonably and, if so, how does that impact the issue of costs? (c) What effect do the offers to settle made by the parties have on costs? (d) If costs are to be awarded, who is to be the payor, and what is the appropriate amount to be paid?

Issues

[23] The appellant raises the following two issues:

(1) Issue 1: Did the arbitrator err in principle, or was he clearly wrong, in finding that the wife was the most successful party? (2) Issue 2: Did the arbitrator err in finding that the husband acted unreasonably?

Issue #1: Did the Arbitrator Err in Determining that the Wife was the Most Successful Party?

[24] The appellant argues that the arbitrator erred in principle or was clearly wrong in finding that the wife was the most successful party, stating: “In family law cases, success is measured by the yardstick of the Offers to Settle. This is precisely what the Arbitrator did not do.” I do not agree that the arbitrator erred in principle. He was alive to the issues, and conducted a contextual analysis. The awarding of costs is a discretionary matter. The determination of who is the more successful party in a case of divided success is a matter of judgment and an exercise of discretion, and is entitled to significant deference on appeal: Crisp v. Crisp, 2013 ONSC 4366, para. 15.

[25] The husband’s central argument is that he was the most successful party since his offer to settle and draft award were “far closer to the mark” than that of the wife in connection with the primary issues in the matter. The type of argument advanced by the husband was rejected by the Court of Appeal in Novkovic v. Kapunsiak, 2008 ONCA 381, where the Court of Appeal held at para. 49:

[49] The appellant also argues that Mr. Novakovic should not receive his costs because while the appellant’s offer was not better than the trial judgment, it was closer to the trial judgment than Mr. Novakovic’s offer. I am not aware of any support for this novel proposition. Certainly, it does not reflect the rules as they relate to the costs consequences of offers to settle.

[26] The husband argues that the arbitrator erred in principle by evaluating the husband’s success based on whether he exceeded his offer to settle and his draft award, but that “there is no mention – anywhere – in Mr. Mamo’s cost award of the fact that Jill had achieved a result $33,000 less per month than what she had offered.”

[27] That is not what the arbitrator did. The arbitrator held, correctly, that Rule 18(14) was not engaged since neither party beat their offer to settle, in part because both offers were not severable. The arbitrator adopted the reasoning in Belair v. Bourgon, 2019 ONSC 2170 at para. 30, where Justice Desmormeau wrote in paragraph 30:

[30] Close is not good enough to attract the costs consequences of 18 (14). The offer must be as good or more favourable than the trial result…

[28] The arbitrator went on to hold that comparing the result achieved to the offer to settle or draft award is important to determining reasonableness, but not success, consistent with the analysis of Kurz, J. in Spadacini-Kelava v. Kelava, 2021 ONSC 2490, para. 69, which I find to be the correct approach. The arbitrator held:

[61] With respect to counsel for Mr. Maxwell, in their cost submissions, they are in error when measuring success taking into consideration how close the award figures were to their Client’s Offer or draft award than made by Ms. Maxwell. Litigation is not a game of horseshoes and, as such being close to the pin might assist in an analysis relating to reasonableness under Rule 18 (16), but not when it comes to the measurement of success.

[86] The measurement of success under Rule 24 should not import components of Rule 18 (14) if all the conditions of that Rule are not met. The argument that one litigant, on a specific issue, achieved a result that was “closer” to the eventual outcome than the other party’s position on the same issue might be a relevant consideration in determining reasonableness in exercising one’s discretion in the award of costs, but is not a yardstick by which success is measured in order to import the presumption of entitlement to costs under Rule 24 (1).(emphasis in original)

[29] The arbitrator was alive to the purposes of offers to settle. He was critical of both parties for their late, unseverable offers. He explained why he found the offers of little use in evaluating reasonableness as follows:

[54] The offers to settle served, based on the timing of their delivery, and in the context of animosity and conflict in the litigation, predictably did not create any reasonable prospect of a resolution, not just because of the figures contained in the offers but also given the fact that the structure constituted an “all or nothing” approach leaving no opportunity for the parties to be able to accept certain terms of the offer and litigate the balance.

[55] In the circumstances, the parties’ lack of use of offers to settle during an eight-year period, the timing of the offers to settle when made and the structure of the offers to settle, renders the offers made unhelpful when it comes to the determination of success and only marginally of assistance when it comes to assessing the reasonableness of the parties’ positions at the hearing.

[30] Ultimately, the arbitrator determined that Ms. Maxwell was more successful because the award made was better for her than what Mr. Maxwell had offered to pay, which also failed to provide security for the support payments. Moreover, as he set out in his reasons, the legal issue was what, if anything, Mr. Maxwell had to pay prospectively or retroactively to Ms. Maxwell and whether he had jurisdiction to grant security for the support payments. He decided that in connection with these issues, Ms. Maxwell was the more successful party, given the retroactive and prospective award that he made and that he made an award regarding the security for her support payments.

[31] The arbitrator’s award was financially better for Ms. Maxwell than the offer that Mr. Maxwell served, and better than the draft award. The monthly support payments were higher by $84,000 annually for an indefinite duration, and the retroactive payments were higher as well. Moreover, although the husband argues that the issue of security for support was not an important issue given the amount of time spent at the arbitration, the arbitrator found that security was very important to the wife. This was a determination of fact open to the arbitrator – and there is no palpable and overriding error in that respect. The importance of an issue is not gauged solely by time spent at arbitration. Indeed, on a binary question such as security vs. no security, little time is required on either the law or on facts.

[32] Overall, there was nothing clearly wrong about the arbitrator’s determination of success, or his analysis of Rule 18(14) and the offers to settle. The arbitrator considered all the considerations he ought to have taken into account, and did not err in principle or law.

Issue #2: Did the Arbitrator Err in Finding that the Husband Acted Unreasonably?

[33] The husband argues that the arbitrator made a factual error in finding that the husband acted unreasonably by pursing allegations of fraud on the part of Ms. Maxwell and her mother. The burden is on the appellant to establish a palpable and overriding error of fact. A palpable and overriding error is one that is clearly wrong, unreasonable, or not reasonably supported on the evidence. The Supreme Court of Canada held in Salomon v. Matte‑Thompson, 2019 SCC 14, 432 D.L.R. (4th) 1, at para. 33, that “[w]here the deferential standard of palpable and overriding error applies, an appellate court can intervene only if there is an obvious error in the trial decision that is determinative of the outcome of the case.”

[34] The alleged error is not a palpable and overriding error: there was evidence upon which the arbitrator could have relied to reach the conclusion he did. Moreover, it is not an obvious error determinative of the outcome of the costs decision.

[35] The arbitrator found that each of the parties acted unreasonably. He found that Ms. Maxwell behaved unreasonably in:

(i) Participating in taking eight years to bring the mandated review to a hearing. (ii) Only serving one Offer to Settle a few days before the start of the hearing. (iii) Making the Offer to Settle an "all or nothing" choice. (iv) Lack of transparency and clarity with respect to her income during the period between 2014 and 2022; combined with a lack of objective and professional analysis. (v) Pursuing arguments with respect to Mr. Maxwell's income that were not supported by her own expert and in the absence of a reliable factual record to substantiate the allegations.

[36] The arbitrator found that Mr. Maxwell behaved unreasonably in:

(i) Participating in taking eight years to bring the mandated review to a hearing. (ii) Only serving one Offer to Settle on the day before the start of the hearing. (iii) Making the Offer to Settle an "all or nothing" choice. (iv) Lack of timely disclosure with respect to his significant income between 2019 and 2022, and making no attempt to increase his support payment to reflect the level of income earned during these years. Not negotiating to increase his child and spousal support voluntary payments in light of his substantial increase in his earnings. (v) Pursuing allegations of income tax fraud on the part of Ms. Maxwell and her mother in the absence of a reliable factual record to substantiate the accusation.

[37] The arbitrator described the impact on his discretionary decision of his determination that both parties had behaved unreasonably. The arbitrator held:

It impacts the quantum of costs payable by Mr. Maxwell to Ms. Maxwell taking into consideration a balancing of consequences in view of the fact that each side had acted unreasonably in the overall conduct relating to the review.

[38] Far from “punishing” Mr. Maxwell through costs as alleged, the arbitrator made a significantly reduced costs award. The arbitrator awarded Ms. Maxwell a fraction of the costs she sought - $78,000.00, when she sought costs of more than $340,000, and Mr. Maxwell himself had claimed costs of $209,000.

[39] First, the arbitrator did not find that Mr. Maxwell had acted unreasonably only based on alleging fraud. The arbitrator concluded that Mr. Maxwell had acted unreasonably based on five factors. I do not find factor #5, the pursuit of fraud, to be an obvious error that is determinative of the outcome of the case. It was one of several factors considered and weighed by the arbitrator.

[40] Second, I do not agree that the arbitrator made a palpable and overriding factual error in finding that the husband acted unreasonably by pursing allegations of fraud on the part of Ms. Maxwell and her mother. The husband made allegations of CRA fraud between the wife and her mother in an affidavit in February 2021 sworn on the interim support motion. The offending paragraphs were struck on the interim motion. The husband did not include the allegations of fraud in his final affidavit. But the parties and the arbitrator had agreed to adopt a hybrid model, relying on the transcript of questioning with time-limited cross-examinations at the hearing. And the record indicates that as late as questioning in October 2021, the husband continued to pursue the notion that the wife and her mother had participated in CRA fraud. When examined at the arbitration hearing, he conceded that he had not withdrawn the fraud allegations, although the paragraphs were not contained in the final affidavit. He also conceded on his questioning that he did not have evidence of the wife and her mother perpetrating fraud on the CRA.

[41] Third, that the claim was not present in Mr. Maxwell’s affidavit sworn in support of his position at the Final Arbitration after the arbitrator had struck those paragraphs, does not mean that Mr. Maxwell “abandoned the claims.” He was not prepared to do so at his questioning, even after the paragraphs were struck. There was thus some evidence upon which the arbitrator could find that the husband acted unreasonably in pursuing allegations of income tax fraud on the part of Ms. Maxwell and her mother in the absence of a reliable factual record.

[42] Finally, the arbitrator was not limited considering to considering the unreasonableness of conduct in the isolated manner argued by the husband. It was open to him to consider conduct in the context of the case, including conduct at interim stages, not just at the arbitration hearing.

[43] The appeal of the Arbitration Award of Alfred Mamo, dated February 10, 2023, is dismissed, with costs to the respondent.

[44] If parties are unable to agree on costs, written submissions shall be served and filed as follows. The respondent by August 6, limited to three double-spaced pages, plus offers to settle, and Bill of Costs; the appellant, eight days after receipt of respondent’s submissions, subject to the same page limits. If this interferes with vacations, then the parties are free to agree on another timetable which will accommodate summer vacation plans.

“Justice Kristjanson”

Date: July 25, 2024