“Settlements do not attract costs consequences in the same manner as argued matters; in the case of an agreed-upon result, the concept of success is different. The case law indicates that the success of a negotiated settlement must be much clearer and more substantial than in the case of an argued matter to attract costs. The issue of success must indicate, in the wording of one case, a “clear capitulation” by one party to another: see Atkinson v. Houpt, 2017 ONCJ 316. Other cases have said that the measure of success for costs consequences must be “overall success”: Scipione v. Del Sordo, 2015 ONSC 5982.
The reason for this is clear as pointed out in the latter case: in the course of negotiating a settlement, costs should not be permitted to hijack the process. If a party is negotiating while keeping his or her eyes on the terms of their offer, this impedes settlement for obvious reasons. A party conducting himself in this manner puts the cart before the horse and to place costs at the forefront of negotiations is an impediment to settlement and to be discouraged. As noted by Kurz J. in Frape v. Mastrokalos, 2017 ONCJ 915 adopting the words of Starr J. in Shute v. Shute, 2017 ONCJ 533:
Where a matter settles, the success and/or reasonableness of the conduct of the parties is a consideration but not the most important one. In such cases, the emphasis should be on discouraging inappropriate conduct and promoting settlement. Thus, instead of identifying a reason not to award costs, the court must identify a compelling reason to make an award.”