Goldstein v. Walsh, 2019 ONSC 3174: The Effect of Bad Faith on Costs of Litigation

In Goldstein v. Walsh, the court was tasked with determining whether the Applicant (“Father”) conducted the proceedings in bad faith, and, if so, what the corresponding consequences should be when awarding costs to the parties.

Background

This was a custody and access trial that took place over 12 days. The Respondent (“Mother”) seeks her costs on a full recovery basis of $456, 411.14, including disbursements and HST, arguing that (a) she beat her Offer to Settle, and (b) the Father conducted himself unreasonably and in bad faith. The Father, in turn, argued that the quantum costs by the Mother are “grossly punitive, excessive, unreasonable and disproportionate to the complexity of the proceeding.”

In all, the court found that the Father took unreasonable and obstructive positions throughout the proceedings, which complicated the issues and evidence of the case and resulted in higher-than-necessary legal fees.

Analysis

The Father made false allegations at the start of the case, which he relied upon to obtain an ex parte order to enforce restrictions related to the child. Some of the false allegations were defended until the end of the trial to undermine the Mother’s competence as a parent. The court concluded that the Father misled the court during the ex parte motion to obtain a litigation advantage, which deprived the child of contact with her Mother, an action that is contrary to the child’s best interests. In addition to the false allegation as to the Mother’s role in parenting, the father’s bad faith conduct was demonstrated through requiring supervised access solely based on misrepresentations and providing misleading evidence at trial.

The court determined that the Father took these actions to both deceive the court and inflict emotional and financial harm to the Mother. In addition, the Father’s unreasonable behavior while the parties communicated about decisions required counsel to be involved, which resulted in higher costs of litigation.

The Principles of Bad Faith

In Mattina v. Mattina, the Court of Appeal held that family cost rules are designed for the fundamental purposes of: (1) partially indemnifying successful litigants; (2) encouraging settlement; (3) discouraging and sanctioning inappropriate behavior by litigants; and (4) ensuring, in accordance with Rule 2(2), that cases are dealt with justly.

The principles of bad faith are outlined in S.(C.) v. S.(M):

  • Behavior shown to be carried out with the intent to:
    • inflict financial and/or emotional harm on the other party;
    • conceal relevant information; or
    • deceive the other party or the court.
  • Costs incurred as a direct result of the bad faith actions.
  • Taking actions that are aimed for an alternative purpose.

The Father submitted that the quantum of legal fees sought by the Mother were unreasonable and disproportionate, using over-lawyering as one of his main arguments. However, he did not initially file his Bill of Costs. As laid out in Beaver v. Hill, “consideration of the other party’s Bill of Costs is particularly helpful that party challenges a costs claim on the basis of alleged excess and over-lawyering…such allegations amount to ‘no more than an attack in the air’ if the unsuccessful party fails to produce their own Bill of Costs…” The court stated that the rates of counsel were reasonable and consistent with the rates of lawyers in downtown Toronto and justified because the father pursued a “scorched earth” litigation, which calls out big guns in response.

The Court’s Determination

Rule 24(8) of the Family Law Rules states that if a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately. Rule 24(12)(a)(i) adds that the reasonableness and proportionality of each party’s behavior is relevant to setting the amount of costs.

On the basis of bad faith and unreasonable conduct, the court determined that the Mother was entitled to costs on a full recovery basis and awarded her $420,000, inclusive of disbursements and HST. This case shows that the court highly discourages and does not tolerate bad faith conduct and awards costs in a proportional and reasonable manner.

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