Saturday, November 30, 2013

Made in Canada legal system costs policy precludes access by design


By Denis G. Rancourt

The express policy and practice of legal costs payable by the losing party of any and all litigation steps in a Canadian legal action are unjust by design, and preclude access to justice, yet the Canadian legal establishment has been morbidly and steadfastly silent about this systemic perversion.

By a straightforward application of Foucaultian institutional analysis, one is required to conclude that the unstated true purpose of the Canadian legal system's costs rules and costs policy is to frustrate and deny access to the less financially endowed party in any legal battle, or to both parties of limited means when such is the case.

Chief Justice of Canada Beverley McLachlin goes on and on about the problem of limited "access to justice", with oblique references to high legal costs and to the increasing pressures on the courts, but without ever a word regarding the policy framework and judicial practice that are the root cause precluding access to justice.

In the Canadian judicial mind it is an article of faith that the legal system's motives are pure, and that this purity is actuated by constantly improved policy and practice that need not be subject to overriding critical analysis.

In the mind of the Chief Justice, "access to justice" is frustrated by growing legal costs and increasing demand for court services, often verbalized by legal practitioners as "the self-represented litigant crisis", without any hint that established rules and policies of the courts may actually be a structural cause of the problem.


Here is how it works.

In any given litigation, there are typically several intermediate and preliminary "steps" or "motions" heard before the court. These motions are to determine procedural matters such as discovery of the evidence, limits to discovery, refusals to disclose relevant documents, whether there is a cause of action (legal reason to sue), whether the court has jurisdiction over the matter, whether any claim constitutes an abuse of process, whether the action itself is an abuse of the court process, questions of court process transparency, and so on.

For every such step or motion, the costs rules impose that the party losing the motion must immediately pay the legal costs of the winning party for litigating the motion. Note that these are the legal costs of litigating (paying lawyers), not any damages or contractual awards sought in the action.

In this way, a party can be forced to pay hundreds of thousands of dollars in costs before the action is even set down for trial, irrespective of the actual claim for reparations in the action.

Obviously, this paying-for-motions rule immediately creates a situation where a party with deep pockets can financially exhaust any opponent, especially since the opponent is also paying his/her own legal costs. The possibility alone of this tactic should be enough to cause the legal system to implement strict rules and oversight preventing any costs-based procedural bullying by dominant parties. But such is not the case. The whole thing is left to the discretion of the motions judge, without requiring evidence of actual costs, and without a right to appeal the costs decision.

That is correct. A judge's costs decision, for a single motion, can be over one hundred thousand dollars, more than the great majority of awards in actions, yet the costs decision is not based on any evidence, only on a lawyer's cursory claim (written submission), and the decision carries no right of appeal. How is that for an exemplary system without safeguards? One cannot even know how much the opposing lawyer actually charged his/her client for the services for which costs are claimed, as that is considered top secret ("solicitor-client privileged").

But, for the sake of argument, let us assume that there is no need to appeal costs decisions because motions judges never make mistakes, and let us assume that lawyers never lie about costs, not even when no verifications are possible, and let us next examine the system's highest-level policy rational for requiring that a party losing a motion pay the legal costs of the winning side, in addition to its own legal costs.


The overriding policy principles at stake with costs of litigation steps are described in a judgement of the Supreme Court of Canada: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71 (CanLII).

There is a hierarchy of policy principles for awarding legal costs of such interim litigation steps.

The first policy principle is that costs are "to indemnify the successful party". That is, compensation for the expense to which the successful party has been put. Simply put: A non-party to the action cannot be indemnified, and if there is nothing to indemnify then no costs are due.

The second policy principle (which is arguably secondary, and which came later in the common law) is that interim costs also serve to discourage both parties from bringing unnecessary litigation steps that have low worthiness.

That's right. Forcing the losing side to pay costs of the winning side is advanced as a way of reducing unnecessary litigation steps. Clearly, however, it is a mechanism for reducing unnecessary litigation steps solely when the litigation is between equal opponents. Otherwise, it becomes an instrument of intimidation and coercion. In any battle where one side can take a loss where the same loss on the other side is more debilitating for the other side, the dominant side will benefit from the attack. Thus, litigation behaviour is eminently predictable with unequal opponents, yet this escapes all the brilliant legal minds that dream up these policy developments and rationalizations.

Indeed, the law is often (and selectively) blind to logic that is correctly anchored in the social reality of power. Within the majestic equality of the law, its gatekeepers rationalize the second policy principle in terms of an objective that is only attainable in the ideal circumstance of equal opponents, and that, otherwise, has the opposite effect.

Put another way, when applied to unequal opponents, the policy can only have its alleged effect if the judge is able to and does make perfectly just decisions on motions, irrespective of the quality of the legal arguments, the depth of the presented evidence, and the social status of the lawyer (within the legal profession), which is virtually never. (It's not called an adversarial system for nothing.)

By design, the costs policy of paying the opponent's costs on motions won by the opponent financially rewards one party for having the financial resources and connections to hire high status lawyers, while financially punishing the other party for not having the financial resources and connections to hire equally high status lawyers.

The above policy analysis is not rocket science (my scientific papers are amply cited by NASA scientists), yet, somehow, the genius gatekeepers of the legal system conclude the opposite effect to arise from the system's costs rules, in the face of the known and obvious mechanisms at play, and without any basis in empirical studies.

To continue, the second policy principle includes the proviso that interim costs should not be so high as to unduly discourage worthy motions, or so high as to prevent a party from pursuing a worthy action to trial.

In order to accomplish the above described and other policy objectives, while being blind to the actual effects of awarding motions costs to the winning party, the legal system in Ontario, Canada, has devised a gradation of costs scales. The lowest scale is the "partial indemnity" scale, and it is intended to be the common scale in practice, directly aimed at addressing the first two policy objectives (indemnity, and moderate discouragement). Practice directives and case law have the partial indemnity scale tentatively corresponding to 60% of true costs.

The idea, therefore, is that just the right costs fraction will achieve the balance between stopping unreasonable motions and not precluding access to trial, while providing some (partial) indemnity.

This is, of course, a fiction. Within the majestic equality of the law, its gatekeepers have found that it is entirely consistent with the policy objectives that "partial indemnity" correspond to 60% of whatever the particular lawyers are charging. With unequal opponents, the dominant side hires expensive lawyers whereas the weak sides hires inexpensive lawyers or is self-represented. Thus, the policy objective is necessarily turned on its head by the application of the rule.

And the court goes so far as to codify this. In the sharp mind of the motions judge, it is pure reason that a client that hires expensive lawyers needs to be indemnified more than a client forced to use inexpensive lawyers having less gravitas with the court.

There you have it. "Partial indemnity" is structurally tied in quantum to how much the party spends on his/her own lawyers. This is an additional mechanism ensuring that the wealthy are rewarded for being wealthy, while the less wealthy are punished for being less wealthy, at every litigation step in the process. 

To add insult to injury, the courts long denied self-represented litigants any costs at all, using the logic that no indemnity is required since no lawyers were paid to do the legal work. (Read that again.)

Only recently* has this common law posture been changed in the case law. Now self-represented litigants are compensated according to lost wages. Of course if the litigant is unemployed or loses his/her job in the process of the litigation, then there is again "nothing to indemnify". While any self-represented litigant who makes as much as a high status lawyer would probably not be self-represented. (*Fong, et al v. Chan, et al, 1999 CanLII 2052 (ON CA); Skidmore v. Blackmore, 1995 CanLII 1537 (BC CA))

The system's position on costs to self-represented litigants especially makes a mockery of the second policy principle, and states that a self-represented litigant's legal work in wining a motion is worthless in terms of value to be indemnified.

To add injury to the insult added to the injury: If a dominant opponent has a non-party (such as the corporate or government employer of the private litigant) voluntarily paying all of its legal costs, then the court, guided by the majestic equality of the law, expressly sees no reason that the dominant opponent would not be indemnified. That is for the case where the non-party funding is disclosed, but there is no requirement to disclose such funding.

So, "indemnity" is the foremost policy principle but the court does not require disclosure of whether or not there is actually something to indemnify. And when it is disclosed that there is nothing to indemnify, since a non-party is voluntarily paying the bills of the dominant opponent, then the court will often pull out the second policy principle to ensure that the weaker opponent gets a good beating.

To add insult to the injury on the insult on the injury: In a recent case where an unemployed self-represented litigant had provided sworn evidence of his impecuniosity to the court, and where the dominant private litigant (a law professor) had her legal costs entirely and voluntarily paid by a non-party corporation, the judge found that the self-represented litigant must pay costs at the highest partial indemnity rate of the winning party's expensive lawyers because, in the words of the court (at paragraph 34), it is "important to avoid a situation where a person without means can cause responding parties to incur substantial legal costs without any financial consequences."

Just to be clear: In other words, a person without means must suffer the financial consequences of a partial indemnity costs award to a rich opponent in order to preserve the policy principle that the litigant without means should not bring or defend a motion that he/she will lose. Tadaaa. A person without means must be punished beyond his/her means for seeking procedural justice and losing, even if the other side has not incurred any costs.

Let's try stating it again: A party without means cannot, in the process of litigation, cause a rich opponent to incur costs without financial consequences, even if the rich opponent does not incur any costs. -- Yet, the only reason that large legal fees are charged is because there was a substantial legal question to address... And the only reason that the judge heard lengthy submissions and wrote a lengthy decision is because there was a serious legal question that needed to be determined... Otherwise, the judicial motions gatekeeper is not doing his/her job.

There is no right to appeal even that kind of extreme case, but a motion for leave to appeal (special permission to appeal) has recently been filed, which attempts to point out the policy contradictions, to the Court of Appeal for Ontario... If the motion is lost, costs will again be due to the winning party.


The third policy principle has an express punitive purpose. It is to punish overtly abusive practices such as making obviously unsound arguments, needlessly lengthening a process, being uncooperative with the judge, misleading the court, and so on. In such cases, a lawyer can be personally charged for costs of the other party, if the lawyer is at fault. These policy objectives are intended to be met by so-called "substantial indemnity" and "full indemnity" rates.

Again, even the punishments are scaled to the amounts spent on lawyers. Thus, by design, a rich party is punished less (in money amount) than a poor or self-represented party, for the same punishable offense.

One can see the pattern: The wealthy party, when punished (if ever), is forced to pay the meager legal costs of the impecunious party, whereas it's "only fair" that the wealthy party, on winning, be indemnified at the highest rates allowed, by the impecunious party, when there is nothing to indemnify because a non-party corporation is voluntarily funding the private litigant.


In conclusion, the entire costs policy and costs rules in Ontario courts are a shameful travesty, largely upheld by the Supreme Court of Canada, with no indication whatsoever that the legal system has any consciousness of the systemic and structural discrimination that is perpetrated in every litigation step of every action between unequal opponents.

This is in all likelihood not an accident of momentary blindness. The only reason that some discomfort is now being expressed by the Chief Justice of Canada and others is because corporate clients have driven legal fees through the ceiling, which increasingly exposes the unconstrained viciousness of court costs policies against increasing numbers of self-represented litigants. Overall, however, the system will clearly not allow financially disadvantaged individuals to seek and obtain justice. The Courts have never been and will never be for the lower castes, except for the the pro bono show cases, carefully selected to be benign regarding any challenge to the establishment, that justify the Rule.

The author welcomes any feedback to correct or improve the above arguments, prior to further development of these ideas for broader publication.

Denis G. Rancourt is the Self-Represented Litigants Workgroup Coordinator of the Ontario Civil Liberties Association. He is a former tenured and Full Professor of physics at the University of Ottawa, Canada. He is known for his applications of physics education research (TVO Interview). He practiced various areas of science which were funded by a national agency, has published over 100 articles in leading scientific journals, and has written several social commentary essays. He is the author of the book Hierarchy and Free Expression in the Fight Against Racism. He has self-represented himself in several courts and tribunals: labour relations board, access to information appeals, municipal court, Superior Court of Justice for Ontario, Court of Appeal for Ontario, and filed motions at the Supreme Court of Canada.

2 comments:

Denis Rancourt said...

This interesting relevant blogpost by Julie Macfarlane was made on the same day November 30, 2013: Bergen v Sharpe and SRL Costs: The Long and the Short of It

It appears that the courts are inching towards "equal pay for equal work"... but this direction does not solve the systemic problems outlined in my post.

Citizens' Broadcasting Cooperative said...

This is an excellent article. Thank you for explaining this to the public. We have a legal system fashioned to defend the interests of an unelected oligarchy. You have made history by putting yourself on the line to expose the injustices and double standards inherent to the system. Thank you.