Here’s one for the books: In early 2023, an Ontario judge awarded the wife a whopping $950,000 in legal costs – payable by the husband – after presiding over their hotly-contested 12-day trial. The award was justified, the judge said, because of the husband’s bad faith conduct throughout the parties’ 6-year litigation.
What’s more, his bid for permission to appeal that award has recently been rejected by the Court of Appeal.
The former couple started their divorce and custody litigation in 2015. In the time since, it burgeoned into 35 trips to court, 23 motions, 22 offers to settle, and 40 different endorsements and orders. All of that culminated in a 12-day trial, followed by a 70-page decision by the trial judge. The dispute focused mainly on pinning down the very wealthy husband’s true income for child and spousal support purposes – a matter about which he had been actively deceptive and evasive.
At the trial’s end, the wife was the successful party. She sought about $1,045,000 (plus HST) in costs from the husband, which was the full amount she had been charged by her own lawyers (known as “full indemnity” costs). In support of this request, she claimed the husband demonstrated bad faith and unreasonable conduct throughout the litigation and trial, and therefore such an exceptional costs award was fully justified.
The husband admitted he should pay some costs, but considered the wife’s tally exorbitant. He suggested he should pay her about $350,000 instead. Among other things, he argued that to grant the wife over $1 million in legal costs would set a very negative precedent for Family law litigants.
The trial judge disagreed, and ordered the husband should pay $950,000 within 21 days.
The Ontario law on costs in Family law was clear; it required a court to consider a host of factors. Among them were whether any reasonable written offers to settlement were made (and rejected), and also the behaviour of each of the parties. The reasonableness of each party’s behaviour was also assessed against the background of the entirety of the litigation.
Here, the wife had repeatedly offered to settle at an amount much less than what she was ultimately awarded at the trial. But even looking at only the last one – which the husband also rejected – she was entitled to her full costs from the date of that offer onward.
After scrutinizing some of the wife’s various lawyers’ and experts’ fees, and adjusting the total slightly downward, the trial judge next considered whether this was “one of those rare cases where full-indemnity costs are justified because of the [husband’s] unreasonable conduct or bad faith”.
The trial judge found that it was, writing: “I agree with the [wife] that the [husband] demonstrated bad-faith deserving of the highest costs sanction by the court awarding full-indemnity costs.”
Noting that in Family law the concept of “bad faith” requires an element of conscious wrongdoing, the judge catalogued some of the husband’s misbehaviour as including:
- Refusing to provide the bulk of his financial disclosure to assess his global income
- Fraudulently transferring ownership of his company to the wife
- Breaching at least six prior court orders
- Making false representations to the court and being generally deceptive about his true conduct
- Misleading the court into granting an adjournment on the basis the husband’s expert had resigned from the case – when in reality the husband had orchestrated his own expert’s resignation by actively misleading him, withholding information, and being uncooperative
- Engaging in fraud by relying on documents he knew were forged
- Lying about his correct e-mail address, simply to avoid being linked through correspondence to having received millions of dollars in income from a company he claimed his brother owned
- Disavowing a slew of luxury expenses on his credit card, when all other indications were that he was very wealthy
The trial judge repeated one of the sentiments from a prior judge in the proceedings: “In short, it is very difficult to trust the [husband]”.
Even at $950,000, the costs award was proportionate and reasonable. One measure of that, the judge said, was to note that before trial the husband claimed his annual income – at most – was $430,000. However, the financial expert offered convincing evidence that the husband’s income was consistently $7 million per year since 2015. The wife had also been forced to endure long, expensive and hard-fought litigation spanning six years, and to untangle the husband’s income from 25 different corporations, since he was not voluntarily forthcoming with the information.
On the husband’s later bid to appeal, the Ontario Court of Appeal rejected the husband’s request for permission to go forward. It noted that a Costs award is discretionary, and unless the trial judge made an error in principle, it was entitled to deference. The Appeal Court explained:
[10] The costs awarded in this case are indeed high. However, this was complicated litigation conducted over several years, involving 23 motions, multiple family conferences and attendances, and approximately 40 judicial endorsements and orders. The trial judge awarded the respondent costs on a full indemnity basis because of the [husband’s] misconduct throughout the litigation, the details of which are fully documented in his decision. The [husband] misled the court and engaged in fraudulent activity and bad faith and unreasonable conduct over a period of years. We do not accept that it would be appropriate to parse the details of the [husband’s] conduct on the basis that not all of it was motivated by bad faith.
For Family law litigants everywhere: This is a good lesson that bad faith behaviour can cost you!
Full text of the Costs Order: Lakhtakia v. Mehra, 2023 ONSC 539
Full text of the Appeal decision: Lakhtakia v. Mehra, 2023 ONCA 88
