Court of Appeal Decision of the Week

Awarding Costs Against a Non-Party (Like Legal Aid)

Case: Hunt v. Worrod, 2019 ONCA 540

Keywords: costs; non-party; legal aid; litigation funding

Synopsis:

Kim Hunt suffered a catastrophic brain injury in an ATV accident in June 2011. He had an on-and-off relationship with Kathleen Worrod for several years and in June 2010 they had jointly purchased a home. In December 2010, pursuant to an agreement, Mr. Hunt paid Ms. Worrod for her share of the down payment on the home, but title was never transferred into Mr. Hunt’s name alone. Three days after Mr. Hunt’s release from hospital in October 2011, he married Ms. Worrod. Mr. Hunt’s sons, in their capacity as his litigation guardians, commenced an application against Ms. Worrod seeking a declaration that the marriage was void ab initio on the basis of lack of capacity and that Mr. Hunt was the sole owner of the home.

Legal Aid Ontario granted Ms. Worrod a legal aid certificate and funded her legal fees throughout the proceedings. Her counsel received authorization from LAO to obtain a report from a clinical neuropsychologist. The report’s authors concluded Mr. Hunt did not have the cognitive competency to make a decision regarding his guardianship.

After a 10-day trial, the Hunts succeeded on all claims. The application judge ruled that Mr. Hunt lacked capacity to marry, the marriage was void ab initio, and he held the sole equitable title to the home. He further found Ms. Worrod’s claims as “meritless”. Following a costs hearing, the application judge ordered LAO to pay costs to the Hunts in the amount of $192,639.77, which represented 50% of the full indemnity costs that Ms. Worrod had been ordered to pay. He also ordered LAO to pay the costs of $21,281.47 for the costs hearing. The award was based on a finding that LAO’s actions (which included a failure to monitor the proceedings) constituted an abuse of process. The application judge did not make an order of costs against Ms. Worrod’s counsel on the basis his discussions with LAO and his client are privileged and therefore there is no evidentiary basis for finding he acted improperly.

The Court of Appeal allowed LAO’s appeal. Pepall J.A. wrote as follows:

In my view, the costs order against LAO cannot stand. Fundamentally, the application judge misconstrued the role of LAO and there was no evidentiary support for his conclusion that there was an abuse of process by LAO due to its alleged failure to monitor the litigation that it was funding. Moreover, the application judge’s findings were inconsistent with his conclusions relating to the claim for costs against [Ms. Worrod’s counsel] personally.

Importance:

The Court of Appeal made it clear that where LAO is acting as a non-party statutory funder of litigation, it would be exceedingly rare that it could be responsible for costs. The Court found that there would need to be evidence of “bad faith or a collateral or improper purpose in granting funding to a litigant” in order to support a finding of abuse of process and a resulting adverse costs award. In the present case, such evidence was simply not available. The general takeaway is that costs against non-parties are to be awarded “sparingly and with caution”.

Anyone that has prepared opinions in support of a legal aid certificate is aware that LAO does not simply blindly fund litigation. The Court, however, clarified that LAO’s role in litigation remains limited and dependent on outside counsel:

LAO does not represent the client nor does it direct the litigation. Rather, it provides the funding to the client to retain counsel from the private bar. The legal aid system in Ontario permits LAO to rely on the opinions of the private bar lawyers who have carriage of their clients’ files subject to a legal aid certificate. The system is not established on the basis that LAO is required to engage in a detailed factual and legal analysis independent of and disconnected from counsel’s legal opinion. The costs award against LAO based on its failure to adequately monitor the litigation is inconsistent with and would frustrate that statutory scheme.

The Court drew a distinction between legal aid schemes and other third-party funders noting that in the latter there is a potential harm to the administration of justice where a non-party is “profiting unduly from or unreasonably controlling another’s litigation”. In contrast, LAO’s mandate is to administer government funding for low-income litigants, without any financial or other interest in the outcome of the proceedings.

From an appellate practice perspective, the decision is interesting in that it clarifies when leave is required to appeal a costs order. The normal rule, which catches many appellants off-guard, is that leave is required where an appeal is to costs (s. 133(b) of the Courts of Justice Act and R. 61.03.1(17) of the Rules of Civil Procedure). The Court clarified, however, that leave to appeal is not required for an award of costs that relies on inherent jurisdiction as opposed to statutory jurisdiction.

Counsel for the Appellant (moving party Legal Aid Ontario): Gideon Forrest and Mitch Stephenson (Fasken Martineau DuMoulin LLP, Toronto)

Counsel for the Respondent (responding party Kim Kevin Hunt c/o Bradley James Hunt): Michael Barrack, Andrea McEwen and Kimberly Whaley (Blake, Cassels & Graydon LLP, Toronto)

Counsel for the Respondent (responding party Andrew Thomson): Rose Muscolino (Weaver, Simmons LLP, Sudbury)

Counsel for the Intervener (Ontario Association of Child Protection Lawyers): Jodi Martin and Elizabeth Rathbone (Paliare Roland Rosenberg Rothstein LLP, Toronto)

Counsel for the Intervener (Family Law Association): John Phillips and Cory Wanless (Waddell Phillips Professional Corporation, Toronto)

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Posted: Wednesday, July 24, 2019