



COURT OF APPEAL FOR ONTARIO

CITATION: Knight v. Knight, 2019 ONCA 538

DATE: 20190626

DOCKET: C66133

Feldman, Brown and Miller JJ.A.

BETWEEN

David Henry Knight

Applicant (Appellant)

and

Christine MacDonald Knight

Respondent (Respondent)

Gary Joseph and Kenneth Younie, for the appellant

John P. Schuman, for the respondent

Heard: February 21, 2019

On appeal from the order of Justice Clifford S. Nelson of
    the Superior Court of Justice, dated May 25, 2018, and from the costs order,
    dated October 4, 2018.

REASONS FOR DECISION

Overview

[1]

This appeal arises out of hard-fought  and expensive  matrimonial
    litigation. Mr. Knight, the appellant, argues that the trial judge erred in how
    he applied provisions of the parties marriage contract governing equalization
    of net family property. He also seeks leave to appeal an award of costs to the
    respondent in the amount of $490,000.

[2]

As set out below, we do not agree that the trial judge made any error
    with respect to the equalization of net family property, and the appeal on that
    issue is dismissed. Further, the test for leave to appeal the costs award is
    not met, and the motion for leave to appeal costs is therefore also dismissed.

Equalization of property

[3]

The trial judge found the parties marriage contract, dated June 24,
    2011, to be valid. The marriage contract excluded the appellants corporate
    assets from division. It specifically provided that the parties agreed to
    exclude [the appellants] interest in the Corporations
and monies owing to
    him
from the Corporations from the satisfaction of any judgment,
    settlement or agreement which may require [the appellant] to transfer assets or
    pay monies to [the respondent] as part of an equalization payment to her under
    the
Family Law Act
, as amended (emphasis added).

[4]

However, a question arose as to the status of monies owed by the
    appellant to his corporations.

[5]

The appellant was unsuccessful at trial in seeking an unequal division
    of net family property. After the reasons were issued, the court wrote to the
    parties, requesting that they advise as to the specific quantum of the
    equalization payment and the amounts of child and spousal support payable.  The
    parties were unable to reach an agreement on the calculation of the
    equalization payment. Counsel for the respondent wrote to the court on July 26,
    2018, with the agreement of counsel for the appellant, to explain the nature of
    the disagreement. The letter to the court set out the parties competing
    positions:

Paragraph 47 of your judgment reads as follows:

[T]here are two items in dispute under the heading Promissory
    Notes (see part 2: Value of Debts and Other Liabilities on Valuation Date).
    They are of
de minimis
value, and I have ignored them.

Mr. Knight believes that in paragraph 47 of your judgment, you
    also intended to ignore the promissory notes listed at part six of the net
    family property calculation advanced by Ms. Knight (and included in the
    comparison of net family property statements filed during the trial) because
    paragraph 47 is the only place in your judgment where you make reference to
    these promissory notes and at paragraph 39 you stated you were using Mr.
    Knights calculation as your reference point. Further, you found that no
    other corporate debts or assets were included in his net family property.

Ms. Knight believes that you did not intend to ignore the
    promissory notes on the date of marriage because at that time, they were not
de
    minimis
, having a value of $67,315, which was reported as a debt owed by
    David to the corporations in the corporate [
sic
] on the corporate
    financial statements (exhibits 44 and 45), and because at paragraph 39 of your
    decision, you stated that you were not using Ms. Knights calculation because
    she had noted the book value of the corporations in her calculation, which had
    no impact on the calculation in light of your decision with regard to the
    marriage contract.

[6]

The trial judge, in his endorsement dated October 4, 2018, stated that
    the respondents position was correct. He added, I did not intend to ignore
    the value ($67,315) of the promissory notes on the date of marriage. This
    amount is not
de minimis
.

[7]

On appeal, the appellant argues that the trial judge did not provide
    sufficient reasons on this issue to allow for appellate review. We disagree.
    The trial judge made an obvious slip in his initial reasons in characterizing
    $67,315 as a
de minimis
amount. Consequently, he did not adequately
    resolve the issue of how to treat the promissory notes in the net family
    property calculation. When this was brought to his attention by counsels
    letter, he was presented with two competing arguments as to how the debts
    should be treated. He accepted the respondents argument and rejected the
    appellants. Nothing further was required.

[8]

The appellant argues that the trial judge erred in including the
    promissory notes in the calculation of net family property because the
    promissory notes are corporate in nature and therefore excluded by the
    marriage contract from the calculation of net family property. Again, we
    disagree. The marriage contract specifically excludes from the net family
    property calculation monies owed to the appellant by the corporations. It does
    not exclude monies owed by the appellant to the corporations, which are
    personal debts. The promissory notes are not, in the sense used in the marriage
    contract, corporate in nature.

[9]

Further, we do not accept the appellants argument that there was no
    evidence to support the finding of a debt of $67,315. As the respondent noted,
    at trial the appellant did not dispute that he owed $67,315 to the corporations
    at the date of marriage. His argument was, as it is on appeal, that the
    promissory notes are excluded by the marriage contract.

Costs  leave to appeal

[10]

Far
    overshadowing the amount in issue in the substantive appeal is the costs order
    of $490,000 plus HST, enforced through the Family Responsibility Office. The
    appellant seeks leave to appeal. As explained below, we have concluded that
    leave to appeal the costs order should not be granted.

[11]

More
    than half of the costs award is attributable to the fees of the respondents
    accounting expert. At the hearing of the appeal, we requested that the
    respondent submit a brief to the court consisting of the accountants invoices
    with brief submissions to provide context. The appellant provided reply
    submissions.

[12]

The
    trial judge was cognizant that the costs award was high for a 13-day trial.
    However, the trial judge placed the blame entirely at the feet of the
    appellant, whose approach to the litigation he characterized as unreasonable:
    [the appellants] tactics coupled with his unacceptable offers to settle,
    leads me to conclude that his goal was to ensure that [the respondent] suffer a
    considerable financial defeat even if she enjoyed success at trial. The
    respondents legal fees were in the amount of $265,000, while the appellants
    legal fees came in at $172,000. The appellant did not object to any of the line
    items detailed in the bill of costs, but instead argued that he did not have a
    fair opportunity to review the bill of costs at trial. The trial judge rejected
    this submission. On appeal, beyond arguing that the overall quantum is
    disproportionate to the litigation, the only discrete error alleged is in awarding
    costs for previous steps taken in the litigation where no award of costs was
    made. The appellant objected to the vast majority of time docketed prior to
    June 2016, as this, he argued, was a reliable cut-off point for steps in the
    litigation that were governed by prior determinations that no costs would be
    ordered. He further argued that his own bill of costs was a reliable guide as
    to what would constitute a reasonable award.

[13]

The
    largest component of the costs award is a disbursement of $228,306 paid to the
    respondents accounting expert. Of this, $60,000 was for the preparation of a
    report on the appellants income. The rest of the fees related to chasing
    disclosure, which was a significant problem for the respondent, and for
    attendances of the accountant at the disclosure motion, mediation, and trial.
    The respondent delivered an offer to settle prior to each stage and
    demonstrated she was prepared to settle the case on a reasonable basis.

[14]

The
    appellant also seeks to appeal the decision to make the entirety of the costs
    award enforceable as support by the Family Responsibility Office, as opposed to
    only that part of the costs award attributable to the issue of support.

[15]

As
    set out in s. 133(b) of the
Courts of Justice Act
, R.S.O. 1990, c.
    C.43, a discretionary order of costs may not be appealed without leave. Leave
    to appeal a costs order will not be granted save where there are strong grounds
    upon which the appellate court could find that the trial judge had erred in the
    exercise of his or her discretion:
Brad-Jay Investments Ltd. v. Szijjarto
(2006), 218 O.A.C. 315 (C.A.), at para. 21. An appellate court should set aside
    a costs order only if the trial judge has made an error in principle or if the
    costs award is plainly wrong: see
Hamilton v. Open Window Bakery Ltd.
,
    2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[16]

The
    appellant has not met this high threshold. The costs appeal is fact-based and
    seeks to have this court perform a line-by-line analysis that was not pursued
    at trial. The trial judge correctly referred to the relevant factors to be
    considered in awarding costs under Rule 24(11). We see nothing in the costs
    endorsement that reveals an error in principle or an error in the exercise of
    discretion on the part of the trial judge. Although the appellant frames the
    proposed appeal as a question of the proportionality of the costs award, there
    is no genuine argument advanced as to how the order is disproportionate, given
    the trial judges explanation that the costs order is necessary to defeat what
    he perceived to be the appellants tactic of ensuring the respondent would not
    benefit from her success in the litigation. In this instance, the appeal to
    proportionality is nothing other than an attempt to have this court
    second-guess the quantum of the award.

[17]

With
    respect to the FRO order, there is no error in principle in the trial judge not
    having expressly addressed whether a lesser sum would have sufficed for
    enforcement. The enforcement decision is discretionary. Again, the appellant
    seeks to have this court descend into a detailed analysis of the respondents
    dockets to determine whether some portion of the costs award ought to have been
    attributed to property division matters rather than support. This was not
    pursued at trial and this court will not grant leave.

Disposition

[18]

The
    appeal is dismissed, and the motion for leave to appeal the costs award is
    dismissed. The respondent is awarded costs of the appeal in the amount of
    $20,000 inclusive of disbursements and HST.

K. Feldman J.A.

David Brown J.A.

B.W. Miller J.A.


