The Applicant and Respondent were parties to a formal property and separation agreement (the “Agreement”) and each alleged breaches of the Agreement via Applications which were heard during a Special Chambers Application (the “Special Application”). Following the outcome of the Special Application, the Applicant sought Costs and interest, with Costs to be assessed on a solicitor and client basis under a provision of the Agreement which provided for such indemnity. The Respondent resisted the Application on the basis the Applicant was not entirely successful in her Application and breached a mediation requirement in the Agreement (the “Mediation Requirement”). The Court found that the Applicant was substantially successful in the Special Application but did breach the Mediation Requirement.

Among other things, the Court noted that: (1) a successful party to an Application, a proceeding, or an Action was entitled to a Costs Award against the unsuccessful party, subject to a variety of considerations including the Court’s general discretion under Rule 10.31, but that entitlement may not always obtain; (2) a party need not be successful on each argument or claim to relief to qualify for this Costs entitlement; (3) where success is mixed to the extent that it cannot be said that one party was substantially successful, no order should be made as to costs and the parties will bear their own Costs, but where success is divided on multiple issues, an apportionment of Costs may be appropriate with reference to Rule 10.31(3)(c); (4) the exercise of discretion must be case-specific taking into account not only the degree of success by each party but also such factors as the conduct of the parties, the necessary length of the trial and the nature and significance of the evidence presented; (5) the Court will ordinarily hold the parties to the their bargain to pay Costs on a solicitor and client basis, but the Court has discretion to refuse to enforce that bargain based on litigation conduct, proportionality of the expense related to the amounts in issue, degree of success achieved, harshness, and other factors; and (6) Rule 10.33(2) permits the Court to consider a variety of factors including inefficient conduct of litigation, refusals to admit matters that ought to have been admitted, and misconduct of litigation.

The Court determined that the Applicant was entitled to recover Costs notwithstanding her breach of the Mediation Requirement because the Respondent’s positions in the litigation were so unreasonable and contrary to the foundational principles in Part 1 of the Rules that it would be unjust and inappropriate to deprive the Applicant of Costs or absolve the Respondent from liability to pay Costs, or exercise its discretion to deprive the Applicant of her entitlement to receive them on a solicitor and client basis. More specifically, the Applicant’s conduct in the circumstances did not disentitle her to Costs and the Respondent’s litigation conduct was to be discouraged and deterred. The Court acknowledged that breaching the Mediation Requirement was an error in judgment but that it did not give rise to or excuse the unreasonable positions the Respondent had taken in the litigation.

The Court found that although taking positions without merit is not usually sufficient to justify an award of solicitor and client Costs, the appropriate question in the circumstances was, whether the Court should exercise its discretion relieve the Respondent of his bargain to pay them. The Court determined that the Respondent did not present a meritorious defence to paying spousal support and had made bare allegations of dishonesty, fabrication of evidence and abuse of process against the Applicant, all of which were unfounded.