Report to / Rapport au:

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council / et au Conseil

9 February 2009 / le 9 février 2009

Submitted by / Soumis par: City Council / Conseil municipal

Contact / Personne-ressource : Diane Blais, Committee Coordinator /

Coordonnatrice de comité,

City Clerk’s Branch / Direction du greffe

580-2424, Ext. / poste : 28091, Diane.Blais@ottawa.ca

City Wide / À l'échelle de la Ville

Ref N°: ACS2009-CMR-CSE-0001

SUBJECT: MOTION – POLICY ON SEEKING COST AWARDS

OBJET: MOTION - politique sur l’attribution de dépens

REPORT RECOMMENDATION

That the Corporate Services and Economic Development Committee consider the following motion and forward its recommendation(s) to Council:

That Council clarify its policy on seeking cost awards after successfully defending its positions against community and resident public interest groups and that the clarification be structured such that, in such disputes in front of tribunals, the City will not seek cost awards from community or resident public interest groups unless the presiding judge or tribunal or Chair of proceedings indicates that the case advanced by the community or resident public interest group is either frivolous, vexatious or of oblique motive.

RECOMMANDATION DU RAPPORT

Que le Comité des services organisationnels et du développement économique examine la motion suivante et qu’il transmette ses recommandations au Conseil :

Que le Conseil clarifie sa politique sur l’attribution de dépens après avoir défendu avec succès ses positions contre les groupes d’intérêt communautaires et de résidents, et que la clarification soit structurée de façon que lors de tels litiges devant les tribunaux, la Ville ne cherche pas à obtenir l’attribution de dépens à l’encontre de groupes d’intérêt communautaires et de résidents à moins que le juge président, le tribunal ou la personne qui préside la procédure n’indique que la cause défendue par le groupe d’intérêt communautaire ou de résidents est frivole ou vexatoire ou qu’elle répond à des motifs détournés.

BACKGROUND

City Council, at its meeting held on 26 November 2008, referred the following motion (Motion 48/46) to the Corporate Services and Economic Development Committee for consideration:

WHEREAS community groups and resident organizations contribute significantly to public policy development at the City by offering advice and by putting aspects of Council decisions to the test;

AND WHEREAS community and resident public interest organizations contribute to the community agenda in a range of subject areas from the environment to accessibility to business issues to health protection to development issues;

AND WHEREAS this contribution is valuable to the community irrespective of whether the opinion advocated is ultimately shared by the majority of Council;

AND WHEREAS Council wishes to encourage participation in and by such community and resident public interest organizations and, in fact, gives out awards every year to members of the community for their participation in such activities;

AND WHEREAS occasionally, disputes and disagreements over matters of principle sometimes require decisions by third party tribunals, some of which are established specifically to deal with disagreements between public interest;

AND WHEREAS many such tribunals and boards exist to invite participation by individuals, residents and community public interest organizations;

AND WHEREAS it is important to guard City tax dollars against claims and legal proceedings that are frivolous, vexatious or of oblique motive;

AND WHEREAS in instances where the City's position is upheld in hearings, legal and/or other proceedings in front of tribunals, the City operates under a set of practices with respect to whether the City will apply to tribunals to have cost awards charged against the community and resident public interest groups to be paid over to the City;

AND WHEREAS a practice of seeking cost awards could serve as a deterrent to residents considering participating in such organizations or as individuals in the same democratic processes;

AND WHEREAS the City’s Public Consultation policy includes the following provision for periodically refreshing that policy:

§ Facilitating & Building Capacity for a Collaborative Community - Strengthening links between the City and the community on public participation initiatives and building capacity in the community for citizen engagement on issues that affect them through a corporate Public Participation Community of Practice.

BE IT RESOLVED THAT Council clarify its policy on seeking cost awards after successfully defending its positions against community and resident public interest groups;

AND THAT the clarification be structured such that, in such disputes in front of tribunals, the City will not seek cost awards from community or resident public interest groups unless the presiding judge or tribunal or Chair of proceedings indicates that the case advanced by the community or resident public interest group is either frivolous, vexatious or of oblique motive.

This motion was subsequently referred by Corporate Services and Economic Development Committee at its meeting of 20 January 2009 back to staff for a report.

COSTS OVERVIEW

Although the specific case that gave rise to this review of legal costs originally arose at a hearing before the Ontario Municipal Board (“OMB”) and, subsequently, the Divisional Court, the motion expressly refers to “tribunals” in a more generic manner. Therefore, a brief review of the statutory jurisdiction for costs at tribunals generally will precede a more detailed examination of costs at the OMB and the courts.

(a) Statutory Powers Procedure Act

Subsection 17.1(1) of the Statutory Powers Procedure Act (the “Act”) provides that a tribunal may, in the circumstances set out in its rules, “order a party to pay all or part of another party’s costs in a proceeding.” The Act goes on to state that a tribunal shall not make an order to pay costs under Section 17.1 unless the conduct of a party has been “unreasonable, frivolous or vexatious or a party has acted in bad faith.” Furthermore, Subsection 17.1(4) provides that a tribunal may make rules with respect to the “ordering of costs”, the “circumstances in which costs may be ordered” and the amount. Finally, Section 23 of the Act provides a tribunal with the statutory discretion to “make such orders or give directions in proceedings before it as it considers proper to prevent abuse of its processes.”

In summary, the Statutory Powers Procedure Act gives tribunals in Ontario (such as the City’s License Committee) a general power to determine their respective rules, including any with regard to cost awards. However, as will be seen below, both the Ontario Municipal Board and the courts have their own enabling statutes which specifically address rules of procedure and matters regarding costs.

(b) OMB Costs

On appeals before the OMB, one Member recently characterized an order for costs as being “very rare”. In fact, although the Board has the discretion under its enabling legislation to order “by whom and to whom any costs are to be paid”, it has expressly limited that authority in its Rules of Practice and Procedure. For example, in Section 103 of its Rules, the Board, “may only order costs against a party if the conduct or course of conduct of a party has been unreasonable, frivolous, vexatious or if the party has acted in bad faith” [emphasis added]. The provision goes on to state that “clearly unreasonable, frivolous, vexatious or bad faith conduct” may include the following:

Failing to attend at a hearing;
Failing to act in a timely manner;
A course of conduct necessitating unnecessary adjournments or delays;
Acting disrespectfully or maligning the character of another party; and
Knowingly presenting false or misleading evidence.

In a 2007 decision, Member M. G. Somers summarized the Board’s tranditional consideration of costs based on the “reasonable person” standard:

In determining if an award for costs is warranted, the Board must consider all of the circumstances of the case and the conduct of the party. It is only where the Board finds that a party wrongly brought the appeal or participated unacceptably in preparation of hearing events, that an award of costs will be made. The test for determining if a party’s conduct is clearly unreasonable is where a reasonable person, having looked at all of the circumstances of the case, such as the conduct or course of conduct of a party at the hearing and the extent of his or her familiarity with the Board’s procedure, exclaims that the action of the party is not right [emphasis added].

On January 30^th, 2009, the Ontario Municipal Board issued a significant ruling on costs wherein it concluded:

The decision in this matter is intended to reinforce and reiterate the Board’s practice that costs are not awarded lightly nor are they awarded routinely. Awards of costs are rare, especially proportionate to the number of cases decided by the Board.

In this recent case, Kimvar Enterprises Inc. (the “Developer”) brought an application seeking costs of approximately $3.2 million after being successful in a lengthy appeal. In rejecting this application, the Board summarized its caselaw on costs in the following fashion:

…unlike the courts, applications for costs are not routine, and cost awards are rare. In short, a successful party appearing before the Board should have no expectation that it will recover its costs. The Board “does not award costs lightly and it does not award costs automatically. In decision after decision, the Board has expressed a sensitivity to the right of appellants to bring matters before this Board”… . Nevertheless, the Board has also concluded that parties must be accountable for their conduct and if that conduct or course of conduct has been unreasonable, frivolous or vexatious, or if the party has acted in bad faith, then the Board may order costs.

Finally, the decision is also of importance for the fact that it addressed whether or not the Developer’s application for costs had been brought for “improper purposes”. In this regard, the Board noted that, “the suggestion was made that the cost claim was brought for the purpose of silencing public opposition and accordingly constitutes an improper purpose.” Although the Board rejected this suggestion, it went on to accept the submissions made by Clayton Ruby, acting for the Environmental Defence Canada as an intervenor, that, “the public-interest impact of a cost award is a relevant factor that the Board must consider in order to properly exercise its discretion” in such instances.

In its final analysis, the Board reiterated its uniform stance on costs in the following fashion:

The Board agrees with Mr. Ruby’s submission that the Board takes a cautious approach to cost awards against citizens and strives to accommodate public participation in land use planning decisions. In fact, in the very limited number of cases where awards of costs have been made against citizens, amounts have always been nominal. This is entirely consistent with how the Board has typically proceeded: costs cannot be used as a threat to deter public participation; and costs will only be awarded (whether the parties are commercial entities, ratepayers or citizens) where the conduct complained of is so improper that it cannot be ignored [emphasis added].

*****

Nonetheless, there is no question that the claim is unprecedented and the Board finds that an award of costs anywhere near the amount requested would create a chilling effect. In this regard, the Board adopts Mr. Ruby’s submission that the public interest impact of a cost award is a relevant factor for the Board to consider in exercising its discretion. It is for this reason that the Board has restricted awards of costs to the clearest of cases, where the conduct complained of is unreasonable and improper.

(c) Court Costs

In contrast to cost awards before most tribunals, the general standard for court costs is that “costs follow the event”. In other words, the successful party receives some of the costs that have been incurred. Not surprisingly, the expense of litigation can become a deterrent when parties must consider the likelihood of paying the opposing party’s costs, as well as their own. In this regard, the most common costs award is that of “partial indemnity”. As its name suggests, a partial indemnity award is intended to provide a partial reimbursement to a party for the costs it incurred, generally in the range of 50% to 65% of its actual total costs paid. This is generally subject to the proviso that the costs be proportional to the complexity and length of the court hearing. On the other hand, costs awarded on a “substantial indemnity” basis are intended to almost fully reimburse a party its actual costs incurred, usually 80%. Once again, this is subject to the same caveat concerning proportionality of cost to complexity and length of hearing.

In accordance with Subsection 131(1) of the Courts of Justice Act, “the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.” More specifically, Rule 57 of the Rules of Civil Procedure sets out a number of factors (in addition to the result in the proceeding and any offer to settle) that a court may consider when considering the allocation of costs, including:

The apportionment of liability;
The complexity of the hearing;
The importance of the issues; and
Whether any step in the proceeding was improper, vexatious or unnecessary.

As noted above, there are many factors that are to be considered in whether or not a court will award partial indemnity or substantial indemnity in a costs determination. However, one of the more common criteria applied is whether or not an offer to settle was made and the party making the offer was as successful as outlined in the offer. In this respect, parties are encouraged to make an offer to settle under the Rules of Civil Procedure as the cost consequences may be an incentive to compromise. For example, where a plaintiff rejects a defendant’s offer to settle and is awarded more at trial, the plaintiff will generally be granted partial indemnity costs up to the time of the offer and substantial indemnity costs thereafter. Alternatively, where a plaintiff is awarded an amount equal to or less than the defendant’s offer to settle, the plaintiff would receive partial indemnity costs up to the time of the offer, and then the defendant would be awarded partial indemnity costs for the remainder of the trial.

Having reviewed the general rules relating to awards of costs in civil litigation matters, as well as tribunals, generally, it may be helpful to see the application of these rules in the context of actual City cases.

GREENSPACE ALLIANCE v. OTTAWA ET AL.

On December 10, 2008, the City of Ottawa received the decision of the Ontario Divisional Court with respect to costs in the matter of The Greenspace Alliance of Canada’s Capital [the “Alliance”] v. City of Ottawa, 1374537 Ontario Ltd. and Findlay Creek Properties Limited [“Tartan”]. Briefly, costs were awarded to Tartan in the amount of $25,000 and to the City in the amount of $4,876.30 plus G.S.T. Set out below is a summary of the relevant facts that led to this judicial award of costs.

(a) OMB and Judicial Review Decisions

The Alliance had appealed to the Ontario Municipal Board two zoning by-laws which rezoned lands within Leitrim. The appeals were largely on the basis that the by-laws would permit development on what the Alliance alleged to be significant wetlands. Tartan brought a motion to the OMB in May 2007 to dismiss the appeals on the basis that the lands in question had been determined by Ministry of Natural Resources mapping not to be significant wetland. The City supported Tartan’s motion to dismiss. The motion was successful and the appeals were dismissed by the Board on June 18, 2007.

The Alliance then sought a rehearing of the motion pursuant to Section 43 of the Ontario Municipal Board Act. On September 12, 2007, this request was denied by the Board Chair, Marie Hubbard. In October 2007, the Alliance commenced an application in Divisional Court for a judicial review of the Board’s decision to dismiss the appeals.

On June 25, 2008 the City enacted a new Comprehensive Zoning By-law. The appeal period for this by-law ended on July 17, 2008. The Alliance did not appeal the subject lands in the new by-law. As such, Legal Services wrote to the solicitor for the Alliance stating that their appeal was rendered moot by virtue of the fact that the zoning for the lands was now governed by the new Comprehensive Zoning By-law and inviting the Alliance to discontinue the application for judicial review. Shortly thereafter, the City and Tartan jointly made an offer to settle the application on a “no cost” basis if it were discontinued. When the Alliance rejected this offer, the City brought a motion to have the judicial review application discontinued on the basis that it was moot. This motion was heard on October 2, 2008 and was unanimously approved by the Divisional Court.

In its decision, the Court invited the Parties to provide written submissions as to costs. The City sought its costs of $4,876.30 (actual costs incurred in the preparation and argument of the motion with respect to mootness), while Tartan (which had expended some $120,000 on all aspects of the judicial review) sought costs in the amount of $67,217.11

(b) Court Order on Costs

As stated above, the City was awarded $4,876.30, while Tartan was awarded $25,000. In its ruling on costs, the Divisional Court observed that, “Without tracing the history of this litigation, it had to be apparent to the applicant [Alliance] that it had little chance of success”. The Court went on to state that, “Every opportunity was given to the applicant to withdraw its application, including a joint offer to settle from the respondents whereby the applicant could have withdrawn without costs”.

In its submission on costs, the Alliance’s primary argument was that it was a “public interest litigant” and, as such, should not have costs awarded against it. A leading case with respect to costs and public interest litigation (Incredible Electronics Inc. v. Canada (Attorney General)) has held as follows:

One trait of a public interest litigant seems obvious. A public interest litigant, at a minimum, must, in a dispute under the adversary system, take a side the resolution of which is important to the public. There is much more to being a public interest litigant because a private-interest litigant may also take a side in dispute important to the public, but one necessary trait of a public interest litigant is that he or she be a partisan in a matter of public importance.

In the present case, the Divisional Court did not accept the Alliance’s submissions that they were a public interest litigant. While there is no consensus on how best to define “public interest litigation”, it is generally viewed as using the legal system to instigate changes that affect the public. In contrast to the more common private interest litigation, a case found to be “public interest litigation” will usually have wider implications beyond the immediate case and will affect a greater section of the general public than just the named litigant. In this instance, the Divisional Court found that there was no overriding public interest at issue in the litigation and therefore the Alliance could not be a public interest litigant.

On December 19, 2008, legal counsel for the Alliance gave notice of their intent to appeal the Divisional Court’s ruling on costs to the Ontario Court of Appeal.

CANADIANS FOR LANGUAGE FAIRNESS v. OTTAWA

The above approach to costs is consistent with the Court ruling in Canadians For Language Fairness v. City of Ottawa. Briefly, this case constituted a challenge to the City’s Bilingualism Policy. The City expended approximately $243,230 in the defence of the Policy and sought to recover $149,349.46 in costs on a partial indemnity basis. In response, the Applicants argued that they were public interest litigants and that “the ordering of costs would have the chilling effect of discouraging citizens from bringing important public issues into a forum for proper determination.” The Court identified that the key issue in this matter was as follows:

The real question becomes should all of the citizens of the City of Ottawa pay for the litigation of concerns raised by a small group of citizens.

In rejecting the Applicants’ argument, the Court awarded the City $50,000 in costs based on the following rationale:

Having considered all of the circumstances herein including the interests being attacked and protected, I find it would be unjust to have the taxpayers of Ottawa absorb the entire cost of this litigation. Bringing a court action always involves a risk. Litigants must remain aware of that and proceed prudently and on meritorious grounds.

CONSULTATION

This item will be advertised in the local dailies as part of the Public Meeting Advertisement on Friday preceding the Committee meeting.

On January 20, 2009, the Rural Issues Advisory Committee considered this matter and moved the following motion:

Moved by A. Warda

WHEREAS civic participation is essential for a democratic process. Residents and community groups have been long recognized as an important component of policy development and decision-making.

AND WHEREAS a practice of seeking cost awards may significantly deter residents and community groups from participation in the available process and appearing before boards or courts.

BE IT RESOLVED that the Rural Issues Advisory Committee support and endorse the Chiarelli/Cullen motion and urge the City Council to clarify city’s policy on seeking cost awards from residents, community groups and other community based organizations unless the presiding judge or tribunal or Chair of the proceedings indicates that the case advanced by the community or resident public interest group is either frivolous, vexatious or of oblique motive.

CARRIED

LEGAL/RISK MANAGEMENT IMPLICATIONS

The decisions involved in the recommendation of this motion to Council do not have any significant Legal/Risk Management concerns.

FINANCIAL IMPLICATIONS

It is not often in Ottawa that a matter heard by the Ontario Municipal Board is subsequently brought before Divisional Court either by a motion for leave to appeal or a judicial review application. As a result, it is not anticipated that the costs involved for such policy matters will be significant. Further, as validation of the Board’s position on costs in general, costs have not been sought by the City in any planning matter before the Board over the last five years. In fact, prior to the Alliance case, the City had only been before the Divisional Court once on a planning matter in the past five years. In that case, the City was awarded $7,500.00 in costs when the Divisional Court dismissed an application by 156621 Canada Inc. for judicial review of an Ontario Municipal Board decision.

However, as noted above, cost awards before the courts are a routine part of the legal process, as well as a tool to encourage parties to settle disputes. In the case involving the City’s Bilingualism Policy, $243,230 was expended by the City in its defence. Thus, where policy decisions of Council are brought before the Courts by a person or group claiming to represent a larger or public interest, the expenditure of significant sums can be required to defend Council’s decisions.

In summary, the following three court awards of costs have been made to the City from various groups in non-planning matters over the past five years:

· Pub and Bar Coalition of Ontario - $17,797.32 (2002)

· Canadians for Language Fairness - $50,000.00 (2006)

· Adult Entertainment Assoc. of Canada - $121,543.00 (2007)

CONCLUSIONS

In the present instance, the Alliance had two opportunities to make its case before the Ontario Municipal Board (the motion to dismiss and the request for a rehearing) without the risk of incurring any costs. It is staff’s view that, when the Alliance made the third attempt by means of an application for judicial review and then refused to accept the offer to withdraw the application on a without costs basis, it was appropriate that the City seek its costs as they related to the court action only.

Finally, as discussed above, the general principles applied by Legal Services with respect to the question of seeking costs from community groups are set out below.

(a) Ontario Municipal Board

The OMB “rarely” awards costs and only where the actions of a party are clearly unreasonable, frivolous and vexatious or done in bad faith. Even so, the Board’s awarding of costs against citizens has generally been for nominal amounts. As such, the City rarely seeks cost before the OMB from any party and would do so only where this test is met. In addition, this would include consideration of the Board’s most recent pronouncement that “the public interest impact of a costs award is a relevant factor that the Board must consider in order to properly exercise its discretion.”

(b) Courts

The Courts will award costs more regularly than the Ontario Municipal Board or various other administrative tribunals. However, the Courts have developed caselaw which allows a community group to put forward the argument that they are a “public interest litigant” and should not have costs awarded against them if they are unsuccessful. In considering whether to seek costs, staff would review the particular circumstances of each case to come to determine whether the community group fell within the classification of a “public interest litigant” and, thus, whether it would be appropriate to seek costs against it. Ultimately, of course, even if the City sought costs, it would be for the Court to determine if the community group met the definition of a public interest litigant.

SUPPORTING DOCUMENTATION

Document 1 – Memo from the Rural Issues Advisory Committee dated 30 January 2009

DISPOSITION

Legal Services to implement Council’s decision.

To / Destinataire	Chair and Members of the Corporate Services and Economic Development Committee	File/N° de fichier: File NumberG06-03 09 01
From / Expéditeur	Carole Langford, Coordinator, Rural Issues Advisory Committee
Subject / Objet	Policy on Seeking Cost Awards	Date: Date30 January 2009