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A Court Decision on Special Costs in Family Litigation

November 22, 2021

British Columbia

,

Canada

Issue

In a family law case, will the court order costs against a substantially successful party due to their conduct in the litigation?

Conclusion

In family litigation, when one spouse has greater financial resources than the other, the temptation to abuse the court's process so as to put the other spouse to excessive effort and expense can only be effectively neutralized by the willingness of the court to award special costs where such abuse occurs. In order to preserve access for justice for future litigants it is necessary to punish behaviour that deliberately attempts to thwart access to justice. It is not uncommon in family litigation to engage in conduct that increases the stress of the litigation and its cost, attempting to pressure the other party into settling on the desired terms. Inevitably such conduct affects the children and is not in their best interests. Such conduct justifies an award of special costs in favour of the other party, especially where a fine would not sufficiently address the respondent’s reprehensible conduct. (C.A.L. v D.E.L.)

An award of costs is essentially a discretionary order and the standard of review to be applied is strict. While it is apparent there are different approaches to the issue of costs in matters of custody and access in the B.C. Supreme Court, the usual rule that “costs follow the event” (that is, that the “successful” party is entitled to costs) applies in matrimonial proceedings, subject to a discretion to refuse costs to the successful party in certain circumstances. (S.J.C. v. S.-J.C.A.)

The following principles govern awarding special costs:

a) the court must exercise restraint in awarding specials costs;

b) the party seeking special costs must demonstrate exceptional circumstances to justify a special costs order;

c) simply because the legal concept of “reprehensibility” captures different kinds of misconduct does not mean that all forms of misconduct are encompassed by this term;

d) reprehensibility will likely be found in circumstances where there is evidence of improper motive, abuse of the court’s process, misleading the court and persistent breaches of the rules of professional conduct and the rules of court that prejudice the applicant;

e) special costs can be ordered against parties and non-parties alike; and

f) the successful litigant is entitled to costs in accordance with the general rule that costs follow the event. Special costs are not awarded to a successful party as a “bonus” or further compensation for that success.

An award of special costs is usually reserved for misconduct in the course of litigation. Special costs are usually awarded only in relation to misconduct in the course of the litigation itself. However, there may arise circumstances where special costs may be awarded because of reprehensible conduct giving rise to the litigation, particularly where the fruits of the litigation do not provide any appropriate compensation in relation to the reprehensible conduct. (S.R.M. v. N.G.T.M.)

In Butcher v. Hibbs the plaintiff was awarded costs of the proceedings, notwithstanding the Plaintiff's lack of success on the claim. The defendant had failed to provide financial information either to the plaintiff or the Court. He refused to cooperate in the preparation of the report that was ordered. On the issue of maintenance, he was not prepared to recognize his obligations, thus ensuring that a trial was necessary. His conduct during the proceedings served only to prolong them. The plaintiff was be entitled to her costs on Scale 3.

In C.A.L. v D.E.L., the claimant had been only partially successful on her application. But for the respondent’s breaches of the conduct order, the application would not have been necessary. The claimant was awarded her costs of this application in any event of the cause.

Rule 14-1 of the British Columbia Supreme Court Civil Rules provides that costs are to follow the event and must be awarded to the successful party unless the court otherwise orders. (Supreme Court Civil Rules)

There is nothing in the Rules of Court to suggest that custody cases should have different cost consequences than other family matters. A "family law proceeding” is defined in Rule 1(8) as “a proceeding in which relief is claimed under the Family Relations Act or the Divorce Act (Canada) and includes a proceeding for judicial separation or nullity.” Rule 60(2) states that the Rules of Court apply to a family law proceeding. Rule 37(26.1) makes claims in a family law proceeding subject to the rule regarding offers to settle. The legislature has decided that costs follow the event in family law proceedings. (Jensen v. Mains)

Law

In D.M.B. v D.W.A.L, 2018 BCSC 1254 (CanLII), Punnett J. held that in family litigation, when one spouse has greater financial resources than the other, the temptation to abuse the court's process so as to put the other spouse to excessive effort and expense can only be effectively neutralized by the willingness of the court to award special costs where such abuse occurs:

[219] In family litigation, when one spouse has greater financial resources than the other, the temptation to abuse the court's process so as to put the other spouse to excessive effort and expense can only be effectively neutralized by the willingness of the court to award special costs where such abuse occurs. In order to preserve access for justice for future litigants it is necessary to punish behaviour that deliberately attempts to thwart access to justice.

[220] The conduct engaged in by the respondent during this litigation is unfortunately not uncommon in family litigation. It increases the stress of the litigation and its cost. In particular knowing of the claimant’s vulnerability to his actions the respondent continued in his course of conduct. He clearly was attempting to pressure her into settling on his terms, something I find was a continuation of the pattern of his behavior during their marriage. Inevitably such conduct affects the children and is not in their best interests. The respondent appeared oblivious to the impact of his conduct, repeatedly attempting to paint himself as the reasonable and objective party. Such attempts were patently transparent.

[221] The cumulative conduct of the respondent justifies an award of special costs in favour of the claimant. While often a fine is appropriate for a failure to disclose in this case the lack of disclosure was repeated and continuing including trial. A fine would not sufficiently address the respondent’s reprehensible conduct. An award of special costs will.

[222] The respondent was not successful and is therefore not entitled to costs however I will address his claim for special costs. He sought special costs against the claimant alleging her conduct in unilaterally changing parenting arrangements in June of 2014 and demanding support of $6,500 per month (both of which occurred when the claimant had previous counsel) was reprehensible and deserving of rebuke and wasted mediation and legal costs. He also alleges a failure of the claimant to engage in good faith in arbitration and negotiations to settle supports such an award.

[223] I reject the submission of the respondent for special costs. As is apparent from these reasons the respondent’s demands were unreasonable, he withdrew from mediation, he failed to make proper disclosure and breached a court order. The reprehensible conduct was his, not the claimant’s.

In Butcher v. Hibbs, 1991 CanLII 1758 (BC SC), the plaintiff was awarded costs of the proceedings, notwithstanding the Plaintiff's lack of success on the claim:

Finally, the Plaintiff seeks costs of the proceedings. In the circumstances, an award of costs is appropriate notwithstanding the Plaintiff's lack of success on the claim of constructive trust. The Defendant failed to provide financial information either to the Plaintiff or the Court. He refused to cooperate in the preparation of the section l5 report that was ordered. On the issue of maintenance, he was not prepared to recognize his obligations, thus ensuring that a trial was necessary. His conduct during the proceedings served only to prolong them. The Plaintiff will be entitled to her costs on Scale 3.

In C.A.L. v D.E.L., 2018 BCSC 772 (CanLII), the claimant had been only partially successful on her application. But for the respondent’s breaches of the conduct order, the application would not have been necessary. The claimant was awarded her costs of this application in any event of the cause:

[50] Subject to the trial judge’s final determination, costs of the application should follow the event. The claimant has been partially successful on her application. But for the respondent’s breaches of the conduct order, the application pursuant to s. 228 would not have been necessary. Accordingly, the claimant shall have her costs of this application in any event of the cause.

In S.J.C. v. S.-J.C.A., 2010 BCCA 31 (CanLII), the British Columbia Court of Appeal held that an award of costs is essentially a discretionary order and the standard of review to be applied is strict. While it is apparent there are different approaches to the issue of costs in matters of custody and access in the B.C. Supreme Court, the usual rule that “costs follow the event” (that is, that the “successful” party is entitled to costs) applies in matrimonial proceedings, subject to a discretion to refuse costs to the successful party in certain circumstances:

[1] Two of the three appeals before the Court involve the custody of a four year old girl (“J”). The third appeal raises an issue relating to costs.

[...]

[12] I would grant Ms. C her costs of all three appeals.

[...]

[60] An award of costs is essentially a discretionary order and the standard of review to be applied by this Court is strict. One statement of the standard of review is found in Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27, which states that “A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong.”

[61] Counsel have suggested that this Court should take the opportunity to clarify the extent to which the usual rule that costs follow the event should be applied in custody and access cases. This has been the subject of considerable discussion in the B.C. Supreme Court as reflected in the authorities summarized by the trial judge in this case and by Madam Justice Martinson in S.D.W. v. C.W.W., 2006 BCSC 162, 55 B.C.L.R. (4th) 101.

[62] While it is apparent there are different approaches to the issue of costs in matters of custody and access in the B.C. Supreme Court, this Court has previously stated that the usual rule that “costs follow the event” (that is, that the “successful” party is entitled to costs) applies in matrimonial proceedings, subject to a discretion to refuse costs to the successful party in certain circumstances. The authority for that proposition is Gold, in which this Court sat with five judges in order to determine that question. Although Gold was decided in the context of a dispute concerning the division of assets, it has been applied by this Court in several cases where issues concerning the custody of children were involved, albeit in the context of costs of the appeal. See, for example, Karpodinis v. Kantas, 2006 BCCA 400, Yassin v. Loubani, 2007 BCCA 102, 67 B.C.L.R. (4th), and Falvai v. Falvai, 2009 BCCA 387, [2009] 10 W.W.R. 453. (As noted in S.D.W., the Gold approach to costs in matrimonial matters also appears to be in keeping with the approach in other provinces, including Alberta and Manitoba.) In my view, it is not open to this division of the Court to re-open the debate and come to a different conclusion than that expressed in the prior decisions of this Court.

Rule 14-1 of the British Columbia Supreme Court Civil Rules, BC Reg 168/2009 provides that costs are to follow the event and must be awarded to the successful party unless the court otherwise orders:

Rule 14-1 — Costs

How costs assessed generally

(1)If costs are payable to a party under these Supreme Court Civil Rules or by order, those costs must be assessed as party and party costs in accordance with Appendix B unless any of the following circumstances exist:

[...]

Assessment of party and party costs

[...]

Costs to follow event

(9)Subject to subrule (12), costs of a proceeding must be awarded to the successful party unless the court otherwise orders.

[...]

(12)Unless the court hearing an application otherwise orders,

(a)if the application is granted, the party who brought the application is entitled to costs of the application if that party is awarded costs at trial or at the hearing of the petition, but the party opposing the application, if any, is not entitled to costs even though that party is awarded costs at trial or at the hearing of the petition, and

(b)if the application is refused, the party who brought the application is not entitled to costs of the application even though that party is awarded costs at trial or at the hearing of the petition, but the party opposing the application, if any, is entitled to costs if that party is awarded costs at trial or at the hearing of the petition.

[...]

In Jensen v. Mains, 2007 BCSC 1057 (CanLII), Metzger J. held that there is nothing in the Rules of Court to suggest that custody cases should have different cost consequences than other family matters. A "family law proceeding” is defined in Rule 1(8) as “a proceeding in which relief is claimed under the Family Relations Act or the Divorce Act (Canada) and includes a proceeding for judicial separation or nullity.” Rule 60(2) states that the Rules of Court apply to a family law proceeding. Rule 37(26.1) makes claims in a family law proceeding subject to the rule regarding offers to settle. The legislature has decided that costs follow the event in family law proceedings:

[10] First, I agree that there is nothing in the Rules of Court to suggest that custody cases should have different cost consequences than other family matters. A “family law proceeding” is defined in Rule 1(8) as “a proceeding in which relief is claimed under the Family Relations Act or the Divorce Act (Canada) and includes a proceeding for judicial separation or nullity.” Clearly, custody and access cases constitute family law proceedings. Rule 60(2) states that the Rules of Court apply to a family law proceeding. Rule 37(26.1) makes claims in a family law proceeding subject to the rule regarding offers to settle.

[11] Second, I agree that although there are persuasive policy arguments underlying both lines of authority, the legislature’s approach is determinative. The legislature has decided that costs follow the event in family law proceedings, of which custody and access determinations are a part. As Martinson J. explains at para. 13 in S.D.W., supra, there are compelling policy reasons for this approach:

Custody litigation can be emotionally and financially exhausting for the parents and can have significant adverse effects on the children. Because of this, courts wish to encourage parents to resolve their differences by agreement in a way that will be in the best interests of the children. Many pre-trial methods are available for this purpose. A risk analysis is appropriate and costs are a powerful tool for courts to use to encourage parties to make realistic assessments and realistic settlements. Some of these cases also note that ordinary costs are not punitive, but intended as partial indemnification.

[12] The B.C. Court of Appeal recognizes in Graham v. Graham, 2005 BCCA 278 at para. 11, that “Rule 37(26.1) is part of the overall rule that is intended to encourage and facilitate settlement of disputes”. Rule 37(26.1) and Rule 57(9) are useful tools to encourage parties to adopt reasonable positions and make realistic settlements. Custody litigation is seldom in the best interests of children who are already suffering from familial breakdown. Negotiation, mediation, judicial case conferences, and settlement conferences are often more suited to a child’s best interests than litigation.

[13] Third, although the B.C. Court of Appeal has not specifically addressed the divergence in the authorities, it has applied the general rule that costs follow the event in custody cases. In A.L. v. D.K., 2000 BCCA 633, the Court of Appeal addressed the issue of costs in a custody case between the child’s aunt and uncle and the child’s natural father. The trial court had awarded sole custody to the natural father even though he had signed an agreement giving custody to the aunt and uncle. The trial judge used his discretion to not award costs to any party because the case had been a tragedy for all involved and the father had brought the tragedy upon himself by signing the custody agreement. The trial judge found that the father had signed the agreement with full knowledge of its contents. The issue at the Court of Appeal was whether the trial judge had used his discretion in relation to costs appropriately. The Court of Appeal concluded that he had by stating at paras. 10-11:

In my respectful view it is not open to this Court to interfere with that finding of fact. The respondents' state of mind when they signed the agreement, and the circumstances in which it was signed, are matters which depend very much on the oral evidence, and the trial judge's findings on credibility.

The question then, is whether that finding was a proper basis for the exercise of the trial judge's discretion to refuse the successful party his costs. In my view it was. Without the agreement there would have been no basis at all to the plaintiffs' claim to custody. The trial judge was fully cognizant not only of the role that the agreement played in the litigation, but also of the parties' conduct in the litigation, their respective financial positions, and the expense to which all had been put. I am satisfied that his discretion was exercised in a judicial fashion, and see no basis on which we could interfere with its exercise.

[14] Implicit in these reasons is the view that costs follow the event in custody cases except as otherwise ordered by the court. Neither the trial judge nor the Court of Appeal operated from the premise that custody cases fall outside the general rule. The Court of Appeal assessed whether the trial judge exercised his discretion appropriately by considering some of the factors articulated in Gold, namely hardship, respective financial positions, and the parties’ conduct in the litigation. The Court of Appeal awarded costs to the father who was successful in the appeal and costs to the aunt and uncle who were successful in the cross-appeal. I am satisfied that, A.L., supra, stands for the proposition that costs follow the event in custody cases unless consideration of the factors expressed in Gold, or other persuasive factors, warrant exercising the court’s discretion to depart from the general rule.

[15] I find further support for this position in M.F.A. v. R.D.A., 2003 BCCA 4. In this case, the parties made no submissions on costs at the hearing of the appeals and the Court ordered that the parties bear their own costs. Upon receiving written submissions from the parties, the Court of Appeal, reversed its decision and gave the respondent his costs on the first appeal, which addressed the trial judge’s orders with respect to custody and access. The mother unsuccessfully appealed the trial judge’s custody and access decision and the father was awarded costs of the appeal. The parties were ordered to bear their own costs of the second and third appeals because the costs of the appeals were affected by procedural difficulties for which neither party was to blame. Again, the Court of Appeal does not say that custody cases are governed by different cost rules, but rather applies the general rule that costs follow the event.

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