“Costs orders are governed by Rule 24 of the Family Law Rules. Under Rule 24(1) there is a presumption that the successful party is entitled to costs. Subrule 24(11) sets out the factors the court must consider when fixing the amount of a costs order.
The courts have a broad discretion to award costs. The general discretion of the courts regarding costs is contained in the Courts of Justice Act, R.S.O. 1990, c. C. 43, as amended, s. 131(1), which sets out three specific principles:
a) the costs of a case are in the discretion of the court;
b) the court may determine by whom costs shall be paid; and,
c) the court may determine to what extent the costs shall be paid.
Modern costs rules are designed to foster three fundamental purposes: Fong v. Chan, 46 O.R. (3d) 330, 181 D.L.R. (4th) 614, 1999 CanLII 2052, 1999 CarswellOnt 3955 (Ont. C.A.), para. 24:
a) to indemnify successful litigants for the cost of litigation;
b) to encourage settlement; and,
c) to discourage and sanction inappropriate behaviour by litigants.
Rule 2(2) of the Family Law 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.
Justice Pazaratz in Chomos v Hamilton 2016 ONSC 6232, set out the governing principles for costs:
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- Rules 18 and 24 of the Family Law Rulesgovern the determination of both liability for costs and the amount of costs. While these rules have not completely eliminated judicial discretion, the rules nonetheless circumscribe the broad discretion previously granted to the courts in determining costs. C.A.M. v. D.M. 2003 CanLII 18880 (ON CA), 2003 CanLII 18880 (Ont. C.A.); Andrews v. Andrews 1980 CanLII 3619 (ON CA), [1980] O.J. No. 1503 (Ont. C.A.); Wilson v. Kovalev 2016 ONSC (CanLII) (SCJ);
- Rules 18 and 24, and most of the case law focus on two words: “Success” and “Reasonableness”. The latter entails two components:
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a. Reasonableness of behaviour by each party;
b. Reasonableness of the amount of costs to be awarded;
10. In Serra v. Serra, 2009 ONCA 395 (CanLII) the Ontario Court of Appeal confirmed that costs rules are designed to foster three important principles:
a. To partially indemnify successful litigants for the cost of litigation.
b. To encourage settlement; and,
c. To discourage and sanction inappropriate behaviour by litigants;
11. The assessment of costs is not a mechanical exercise. It’s not just a question of adding up lawyer’s dockets: Boucher et al v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), 2004 CanLII 14579; 71 O.R. (3d) 291 (Ont. C.A.); Dingwall v. Wolfe, 2010 ONSC 1044 (CanLII), 2010 ONSC 1044 (SCJ); and,
12. 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: Selznick v Selznick, 2013 ONCA 35 (CanLII), 2013 ONCA 35 (Ont. C.A.); Delellis v. Delellis, 2005 CanLII 36447(ON SC), 2005 CarswellOnt 4956 (SCJ); Serra (supra); Murray v. Murray, (2005) 2005 CanLII 46626 (ON CA), 2005 CanLII 46626 (Ont. C.A.); Guertin v Guertin, 2015 ONSC 5498 (CanLII), 2015 ONSC 5498 (SCJ).
The traditional purpose of an award of costs was to indemnify the successful party in respect of the expenses sustained. For some time, however, courts have recognized that indemnity to the successful party is not the sole purpose, and in some cases not even the primary purpose, of a costs award. The principle of indemnification, while paramount, is not the only consideration when the court is called on to make an order of costs; indeed, the principle has been called “outdated” since other functions may be served by a costs order, for example to encourage settlement, to prevent frivolous or vexatious litigation, and to discourage unnecessary steps. This change in the common law was an incremental one when viewed in the larger context of the trend towards awarding costs to encourage or deter certain types of conduct, and not merely to indemnify the successful litigant.
The traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner’s litigation expenses to the loser, rather than leaving each party’s expenses where they fall, they act as a disincentive to those who might be tempted to harass others with meritless claims. In addition, because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court’s concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs.
Modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer. Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.
When awarded on a full recovery scale, costs can serve to express the court’s disapproval of unreasonable conduct during the litigation.”