Mustang Investigations v. Ironside et al. [Indexed as: Mustang Investigations v. Ironside]

103 O.R. (3d) 633

2010 ONSC 3444

Ontario Superior Court of Justice,

Divisional Court,

Jennings, Lederman and Wilton-Siegel JJ.

July 20, 2010

Civil procedure -- Costs -- Self-represented parties -- Self- represented party entitled to costs only if party not only devoted time and effort to work ordinarily done by lawyer but also incurred opportunity cost by foregoing remunerative activity -- Motion judge erring in awarding costs to self- represented litigant solely on basis that he had done work ordinarily done by lawyer.

The motion judge awarded the self-represented defendant a counsel fee of $20,000 on the basis that he had done work ordinarily done by a lawyer. The plaintiff appealed.

Held, the appeal should be allowed.

To receive costs, a self-represented litigant must demonstrate not only that he or she devoted time and effort to do the work ordinarily done by a lawyer, but also that he or she incurred an opportunity cost as a result by foregoing remunerative activity. In the absence of evidence that the defendant had incurred an opportunity cost, the motion judge erred in making the costs order. [page634]

APPEAL from a costs order.

Cases referred to Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, [1999] O.J. No. 4600, 181 D.L.R. (4th) 614, 128 O.A.C. 2, 93 A.C.W.S. (3d) 222 (C.A.), apld H. (D.) v. Hydro One Networks Inc., [2002] O.J. No. 4547, 30 C.P.C. (5th) 164, 118 A.C.W.S. (3d) 634, 2002 CarswellOnt 2996 (S.C.J.); Izzard v. Friedberg, [2002] O.J. No. 2931, 2002 CarswellOnt 4780 (S.C.J.); Korhani v. Bank of Montreal, [2002] O.J. No. 4785, [2002] O.T.C. 965, 118 A.C.W.S. (3d) 626, 2002 CarswellOnt 4223 (S.C.J.); Logtenberg v. ING Insurance Co., [2008] O.J. No. 2044, 167 A.C.W.S. (3d) 655, 2008 CarswellOnt 2930 (S.C.J.); White v. Ritchie, [2009] O.J. No. 2360, 2009 CarswellOnt 3268 (S.C.J.), consd Other cases referred to Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 188 O.A.C. 201, 48 C.P.C. (5th) 56, 132 A.C.W.S. (3d) 15 (C.A.); Duong v. NN Life Insurance Co. of Canada, 2001 24151 (ON CA), [2001] O.J. No. 641, 141 O.A.C. 307, 25 C.C.L.I. (3d) 22, [2001] I.L.R. I- 3963, 103 A.C.W.S. (3d) 833 (C.A.); Henderson v. Pearlman, [2010] O.J. No. 55, 2010 CarswellOnt 75, 2010 ONSC 149; Mustang Investigations v. Ironside, [2009] O.J. No. 3848, 82 C.P.C. (6th) 80 (S.C.J.) [Leave to appeal granted [2009] O.J. No. 5657 (Div. Ct.)]; Mustang Investigations v. Ironside, [2009] O.J. No. 3110, 82 C.P.C. (6th) 74 (S.C.J.) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 133(b) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 48.04(1), 57.01(1)(0.b)

Kevin D. Toyne, for plaintiff (appellant). John Ironside, in person.

The judgment of the court was delivered by

JENNINGS J.: -- Introduction

[1] Mustang Investigations ("Mustang") appeals from the September 17, 2009 costs award of Perell J. [[2009] O.J. No. 3848, 82 C.P.C. (6th) 80 (S.C.J.)] in favour of the respondent John Ironside ("Ironside") in the sum of $21,051.40.

[2] By her order of December 18, 2009 [[2009] O.J. No. 5657 (Div. Ct.)], Karakatsanis J. (as she then was) granted leave to appeal to Mustang as is required pursuant to the provisions of s. 133(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43. Background

[3] Mustang is a private investigation service for which Ironside worked as a private investigator. Following the termination of his employment, Mustang sued Ironside together with his [page635] common law spouse, Robin Hutt, and Iron Hutt Communications and Iron Hutt Intel and Information Services, two proprietorships of Hutt, alleging that Ironside had unlawfully taken confidential information from Mustang and installed it on the defendants' computers. On May 23, 2006, Campbell J. granted Mustang an Anton Piller order which was continued by Campbell J. on June 2, 2006, having heard submissions from Ironside.

[4] Subsequently, Ms. Hutt agreed to consent to a judgment in favour of Mustang assigning her ownership interest in the hard drives of the computers to Mustang. Mustang, having obtained the relief that it required, determined that it would discontinue the proceedings. As the action had been set down for trial, it brought the appropriate motion under rule 48.04(1) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] for leave to discontinue. The motion came on for hearing before Perell J. on July 13, 2009. Ironside opposed the motion to discontinue on the grounds that he required his day in court in order to vindicate his reputation. Perell J. found that Mustang satisfied him that it had had a bona fide cause of action, that the action was not frivolous or vexatious, and that it was justified in commencing a law suit. Perell J. [[2009] O.J. No. 3110, 82 C.P.C. (6th) 74 (S.C.J.)] held [at para. 28] that "no useful purpose would be achieved by pushing this matter on to a trial" and exercised his discretion to grant leave to discontinue. He imposed terms including costs to be paid by Mustang to Ironside. The parties were invited to make written submissions as to quantum and in default of submissions Perell J. awarded [at para. 35] "nominal costs, which I fix at the sum of $5,000 all inclusive", permitting Mustang to set off against the award, costs it had received on an interim motion before the master.

[5] The parties made written submissions as to costs. Mustang submitted that Ironside should receive costs limited to disbursements in a net amount of $1,541.

[6] Ironside delivered two bills of costs, the larger of which was for $208,138.40, inclusive of disbursements.

[7] The motion judge disallowed $87,500 claimed by Ironside as being not a proper claim for costs, but rather a claim for damages that [at para. 19] "Mr. Ironside may or may not be able to advance in other proceedings".

[8] The motion judge then considered the leading authority on costs to be awarded to unrepresented litigants, Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, [1999] O.J. No. 4600 (C.A.). In para. 10 of his costs endorsement, the motion judge correctly set forth the two principles enunciated by the Court of Appeal in that case in the following language: [page636]

First, the self-represented litigant should not recover costs for the time and effort that any litigant would have to devote to the case. Second, costs should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation and that, as a result, they incurred an opportunity cost by foregoing remunerative activity.

[9] The motion judge interpreted the second principle as requiring a self-represented litigant to simply show that he or she did work ordinarily done by a lawyer without any reference to incurring an opportunity cost by foregoing remunerative activity. In his words, the motions judge said in part, in para. 14 of the costs endorsements, ". . . if the self- represented litigant demonstrates that he or she did the work ordinarily done by a lawyer, then they will have justified receiving an award of costs".

[10] Applying the well known test in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.) (now incorporated into rule 57.01(1)(0.b)), Perell J. was of the opinion that Mustang could reasonably expect to pay costs of approximately $20,000 for counsel fee on a partial indemnity basis for bringing Mr. Ironside before the court. He accordingly awarded that sum for costs plus disbursements in the sum of $1,051.40, for a total award of $21,051.40 [at para. 5] "all inclusive, of disbursements, counsel fee, and GST if any".

[11] On this appeal, Mustang does not quarrel with the finding that costs are due to Ironside and limits its appeal to quantum.

[12] Issue: Did the motion judge apply the correct principles for awarding costs to a self-represented litigant? Standard of Review

[13] The appellant correctly concedes that leave to appeal a costs award is rarely granted because of the deference due to the judge at first instance in exercising his or her discretion to award costs. If leave is granted, the standard of review to be applied is high and the reviewing court may only set aside an award of costs if the trial judge has made an error in principle or if the costs award is plainly wrong (Duong v. NN Life Insurance Co. of Canada, 2001 24151 (ON CA), [2001] O.J. No. 641, 141 O.A.C. 307 (C.A.)). Analysis

[14] Fong v. Chan (supra) is the seminal case in this area of the law. In paras. 25 and 26 of his reasons, Sharpe J.A. wrote:

I would add that nothing in these reasons is meant to suggest that a self-represented litigant has an automatic right to recover costs. The matter remains fully within the discretion of the trial judge, and as Ellen Macdonald J. observed in Fellows, McNeil v. Kansa, supra, there are undoubtedly cases [page637] where it is inappropriate for a lawyer to appear in person, and there will be cases where the self-represented litigant's conduct of the proceedings is inappropriate. The trial judge maintains a discretion to make the appropriate costs award, including denial of costs.

I would also add that self-represented litigants, be they legally trained or not, are not entitled to costs calculated on the same basis as those of the litigant who retains counsel. As the Chorley case, supra, recognized, all litigants suffer a loss of time through their involvement in the legal process. The self-represented litigant should not recover costs for the time and effort that any litigant would have to devote to the case. Costs should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation, and that as a result, they incurred an opportunity cost by foregoing remunerative activity. As the early Chancery rule recognized, a self- represented lay litigant should receive only a "moderate" or "reasonable" allowance for the loss of time devoted to preparing and presenting the case. This excludes routine awards on a per diem basis to litigants who would ordinarily be in attendance at court in any event. The trial judge is particularly well-placed to assess the appropriate allowance, if any, for a self-represented litigant, and accordingly, the trial judge should either fix the costs when making such an award or provide clear guidelines to the Assessment Officer as to the manner in which the costs are to be assessed. (Emphasis added)

[15] Fong was followed by Lane J. in Izzard v. Friedberg, [2002] O.J. No. 2931, 2002 CarswellOnt 4780 (S.C.J.), at para. 3. Some six months later, Lane J. revisited the issue in Korhani v. Bank of Montreal, [2002] O.J. No. 4785, 2002 CarswellOnt 4223 (S.C.J.), referring to his earlier judgment in Izzard, at para. 8 of his reasons:

In Izzard v. Friedberg, [2002] O.J. No. 2931, I dealt with the costs of a successful respondent in an appeal who was retired, but did have other remunerative activities. I refused to assume that he could not have earned some income in the time spent to prepare the case. In the present case, there is no evidence that Ms. Eltajaiein had such an opportunity. I agree with her submissions that she should not be prevented from receiving some modest compensation for the time spent doing the lawyer-type work just because her employment is unremunerated. However, the decision of the Court of Appeal in Fong, supra, makes it clear that there must be an opportunity cost. I cannot allow her compensation for her time.

[16] Fong was applied by Gauthier J. in Logtenberg v. ING Insurance Co., [2008] O.J. No. 2044, 2008 CarswellOnt 2930 (S.C.J.). In para. 16, Gauthier J. held that

. . . self-represented litigants should be awarded costs only when they can show that they devoted time and effort to do the work ordinarily done by a lawyer, and, that, as a result, they lost the opportunity to engage in remunerative activity.

[17] Absent evidence of lost opportunity, Gauthier J. denied costs to the successful plaintiff, adding, at para. 35: [page638]

Once again, the discretion accorded a court pursuant to section 131 of the Courts of Justice Act, does not provide the basis to award costs for loss of time and energy, or for physical and mental fatigue, whether the result of disabilities or otherwise. There is no authority to award costs or time taken away from family, or for reduced quality of life, as claimed by the plaintiff.

[18] The cases to which I have referred have, in my opinion, correctly applied the second principle enunciated by Sharpe J.A. in Fong that to receive costs the self-represented litigant must show that the work done by him or her resulted in a loss by foregoing remunerative activity. I will now refer to cases which, while purporting to apply Fong, have in fact introduced a "spin" on Sharpe J.A.'s proviso to the second principle, which is troubling in that in my opinion the plain language of the decision in Fong does not permit the variation imposed.

[19] In H. (D.) v. Hydro One Networks Inc., [2002] O.J. No. 4547, 2002 CarswellOnt 2996 (S.C.J.), Master Dash correctly set out the principles in Fong, at para. 19 of his decision. At para. 30 of his decision, the master indicated that he would allow the lay litigant 26 hours of time spent provided the litigant "satisfies me that he has 'incurred an opportunity cost by foregoing remunerative activity'". After analysing the evidence, the master concluded that he was not so satisfied. Nevertheless, the master continues, at para. 33 of his reasons, as follows:

Notwithstanding the absence of evidence of lost opportunity costs I am of the view that [the unrepresented litigant] should receive some compensation for his reasonable time spent. The rate should be fair, yet given the absence of proof of loss of opportunity, should be moderate and reasonable . . . . I am prepared to award [Mr. Rashawn] his costs at the rate of $60 per hour, being equivalent to the maximum rate under the costs grid payable to a student-at-law on a partial indemnity scale. (Emphasis added)

[20] More recently, in White v. Ritchie, [2009] O.J. No. 2360, 2009 CarswellOnt 3268 (S.C.J.), Newbould J., having set forth the principles in Fong, stated, at para. 15 of his decision, that "Mr. White has not shown that he has a current job or other income sources that he has had to forego in order to spend time preparing his case. He has not worked for some considerable period of time." Newbould J. concluded, at para. 18, that "It would be wrong in this case, in my view, to disentitle Mr. White for any of the time spent by him to prepare his case even though he is not able to show a specific source of income that he would otherwise have earned during the time he has spent in preparing this case." Newbould J. appeared to base his decision at least in part upon the litigation misconduct of the opposite party in attempting to prevent the unrepresented litigant from obtaining the funds in court to which he was clearly entitled. Newbould J. [page639] disallowed the total amount of hours for which compensation was claimed as being excessive, but, without making any specific finding as to time spent, awarded without further comment [at para. 24] "a reasonable allowance for the work done" of $15,000.

[21] Recently, in Henderson v. Pearlman, 2010 ONSC 149, [2010] O.J. No. 55, 2010 CarswellOnt 75 (S.C.J.), Hennessy J., after alluding to the Fong principles, agreed with the reasoning of Newbould J. in White v. Ritchie and, without making any reference to whether or not lost opportunity costs had been established, awarded the unrepresented litigant 120 hours of time spent at $20 per hour.

[22] Returning to the case before us, I agree with the conclusions of Karakatsanis J. (as she then was), in para. 8 of her reasons for granting leave:

The motions judge interpreted the second principle [in Fong] as requiring a self-represented litigant to demonstrate only that he or she did the work ordinarily done by a lawyer in order to justify a costs award. However, the effect of such an interpretation is to treat the first and second requirement as two different ways of expressing the same principle. Furthermore it gives no effect to the concluding requirement "that as a result, they incurred an opportunity cost by foregoing remunerative activity".

[23] In my opinion, the language used by Sharpe J.A. is clear. First, to receive costs a lay litigant must demonstrate that he or she devoted time and effort to do the work ordinarily done by a lawyer and that as a result he or she incurred an opportunity cost by foregoing remunerative activity. Second, if an opportunity cost is proved, a self- represented litigant should only receive a moderate or reasonable allowance for the loss of time devoted to preparing and presenting the case.

[24] If I am right in that analysis, the motion judge in this case erred by ignoring the proviso regarding an opportunity cost and, further, awarding the self-represented litigant the partial indemnity costs that the plaintiff could reasonably be expected to have paid to a lawyer had one been retained by Ironside. Accordingly, the award of $20,000 was calculated on an error in principle and in my opinion is plainly wrong. It must be struck.

[25] The question then arises as to what amount if any should have been awarded to Ironside above the net amount for disbursements, which are not in dispute on this appeal.

[26] The motion judge was initially of the impression that nominal costs should be fixed at $5,000 inclusive, against which $200 awarded by the master may be set off, for a net recovery of $4,800.

[27] As I have said, Master Dash, and several trial judges, seem to have interpreted Fong as saying that even in the absence of proof of an opportunity cost, one may assume that [page640] because the lay person was involved in the litigation preparing material that might otherwise be prepared by a lawyer, he or she should nevertheless be entitled to nominal costs. With great respect to the master and those judges, I'm unable to find that the language in Fong permits an award to be made without the self-represented litigant demonstrating that, as a result of the lawyer-like work put in on the file, remunerative activity was foregone. Simply stated, no proof of opportunity cost, no nominal costs available.

[28] It may be that in some cases an injustice will result, to which I would make two responses: (1) it is difficult to see any injustice in compensating someone for a loss not incurred; and (2) regardless, the principle of stare decisis does not permit this court, or judges sitting in motions, or masters, to modify a decision of the Court of Appeal.

[29] In my view, there was nothing referred to in the decision of the motion judge which would permit him to infer a loss of remuneration and I would not allow an award on that account.

[30] One further matter should be addressed. It is a matter of concern to the courts that there are an increasing number of unrepresented litigants appearing in a vast spectrum of matters. A question of whether self-represented litigants without legal training should be compensated for performing work normally done by a lawyer at rates for legally trained persons, be they senior lawyers, junior lawyers or law students, will have serious and far-reaching consequences. It is a matter which, in my opinion, is better considered by the legislature, on the advice and with the input of the Rules Committee, than by the courts.

[31] In the result, the appeal is allowed and the award of $20,000 for counsel fee on a partial indemnity basis is set aside. The award for disbursements is confirmed at $1,541, against which may be set off the $200 awarded by the master.

[32] This appeal raised issues of significant importance to the profession and to the public having recourse to the courts. Under the circumstances, and in light of the amount at issue in this matter, we are of the opinion that justice would be served if no costs of the appeal are awarded.

Appeal allowed.