Settling Everything But Costs
Parties to a proceeding often are able to come to a resolution of all issues, other than costs. All sides are, usually reluctantly, prepared to come to a compromise. However, with respect to the nagging issue of costs, each side feels that the other side caused the litigation and the associated costs, and wants the other side to pay.
It is sometimes proposed that the parties settle, and leave the issue of costs to be decided by the court.
This, however, can lead to serious difficulties. How is a court to decide who was right or who was wrong in the litigation without hearing evidence on the question? If the court has to have a full record of evidence in deciding the question of cost, what savings are there? (Of course, some may argue that the “saving” is the avoidance of risk on the question of liability; which risk is avoided by the settlement.)
The question of under what circumstances should a court award costs where the parties have settled all areas in dispute but for costs was addressed in Dhillon v. Dhillon Estate, 2009 CanLII 58607 (ON SC). There, there was a family law proceeding that evolved into estate litigation upon the death of the wife. The claims raised numerous issues, including custody and access, validity of changes to beneficiary designations, dependant support, and the possible forgery of a Will and beneficiary designations. All of these matters were settled on “the eve of trial”, except for costs. Each party sought “substantial costs” from the other.
The court referred to the decision of Anishinaabe Child and Family Services Inc. v. CBC,  M.J. No. 181 (Q.B.), where it was stated that ” Where parties make a settlement as between themselves, the court in my view should be very slow to make an award of costs against one of the parties. Unless there are compelling reasons to do so, costs in the circumstances of the settlement between parties ought not to be awarded by the court.”
The court noted that the Anishinaabe decision has not been followed universally in Ontario.
The court also noted its unfortunate position in being asked to rule on costs without hearing the evidence: “The discretion of the court under s. 131 of the Courts of Justice Act and the factors in Rule 57.01(1) of the Rules of Civil Procedure that form the parameters for the exercise of discretion under s. 131 require factual findings relating to the reasonableness or lack of reasonableness in the conduct of each of these litigants. In the absence of such findings, it is problematic in the extreme for the court to exercise its discretion on a rational basis in making any costs award.”
The court also observed that determining who was successful based on a review of the Minutes of Settlement was not a determining factor. “There are doubtless many motivating factors why parties enter into settlements and why a particular party may resile from claims or defences to claims either made or responded to. Again, the reasonableness or unreasonableness of any party’s position in either asserting a claim, abandoning a claim or abandoning a defence or answer to a claim can depend on a myriad of factors. In the absence of judicial fact-finding, unknown motivating factors cannot be relied on by the court for purposes of applying the factors in Rule 57.01(1) on costs questions.”
Thus, when settling a matter, a global settlement including the issue of costs should be strived for. Leaving the issue of costs to the court is not usually an ideal or appropriate option.
Thank you for reading.