COURT OF APPEAL FOR ONTARIO
CITATION: Galganov v. Russell (Township), 2012 ONCA 410
DATE: 20120615
DOCKET: C54486
Weiler, Sharpe and Blair JJ.A.
BETWEEN
Howard Galganov
Applicant (Respondent)
and
The Corporation of the Township of Russell
Respondent
BETWEEN
Jean-Serge Brisson
Applicant (Respondent)
and
The Corporation of the Township of Russell
Respondent
Allan O’Brien and Ashley Deathe, for the appellant, Kenneth Bickley
Brian A. Crane, Q.C. and Matthew Estabrooks, for the respondents, Howard Galganov and Jean-Serge Brisson
Ronald F. Caza and Marc Sauvé, for the respondent, The Corporation of the Township of Russell
Heard: February 3, 2012
On appeal from the orders of Justice Monique Métivier of the Superior Court of Justice dated May 30, 2011 and September 23, 2011, with reasons reported at 2011 ONSC 3065 and 2011 ONSC 5609.
Weiler J.A.:
A. Overview
[1] This appeal respecting costs was heard immediately following the appeal in C52704 and these reasons are being released concurrently with the decision in that appeal.
[2] The appellant, Mr. Kenneth Bickley, is a lawyer who represented Messrs. Howard Galganov and Jean-Serge Brisson in their respective applications to quash a by-law passed by the Township of Russell (the “Township”). The by-law in issue, no. 49-2008, (the “By-law”) requires that the message or content of new exterior commercial signs be in French and in English. After four days of hearing, the application judge dismissed both applications. This court confirmed the application judge’s conclusion in C52704 and dismissed the appeal.
[3] The application judge’s decision on costs was based both on written submissions and on a motion for costs brought by the Township against Bickley personally.[^1] On consideration of the factors in rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194applicable to the court’s discretion to award costs, the application judge ordered costs of $180,000 against Galganov and Brisson ($100,000 against Galganov and $80,000 against Brisson). However, she ordered that 40 per cent of the costs order be payable by Bickley personally ($72,000) pursuant to rule 57.07(1) of the Rules of Civil Procedure. She made the order against Bickley on a joint and several basis with Galganov and Brisson.
[4] In respect of the order for costs against Bickley personally, the Township alleged that “in preparation for and during the hearing, Mr. Bickley’s conduct was often highly inappropriate, incompetent and the cause of unnecessary costs.” The application judge therefore considered several allegations of incidents which caused costs to be incurred without reasonable cause (see paras. 67-68 of the reasons reported at 2011 ONSC 3065).[^2]
[5] Bickley submitted that he was prevented from responding to some of the allegations because of solicitor-client privilege and Galganov and Brisson refused to waive such privilege. He submitted that he took no step in the proceeding without the proper instructions and authority of his clients. The application judge accepted this submission and indicated that this was a reason why a costs order against a lawyer should be made sparingly, and only in the clearest of cases.
[6] The application judge found that Bickley did not act in bad faith but also held that this was not a necessary element for a costs order under rule 57.07(1). She then addressed each of the complaints and found that several incidents of Bickley’s conduct caused costs to be incurred unreasonably, including: (1) the ongoing debate of whether the mayor of the Township, Mr. Ken Hill, would be called as a witness; (2) the decision to propose both Galganov as an expert witness in Brisson’s application as well as Dr. Conrad Winn, a Carleton University political science professor and public opinion researcher; (3) the attempted introduction of an article which had not been put to the Township’s expert, Dr. Charles Castonguay, a retired University of Ottawa mathematics professor; and (4) the request to turn the application into a trial relying on an erroneous reference to “rule 39.5” (this rule does not exist in the Rules of Civil Procedure).
[7] The application judge also held that Bickley’s filing of additional affidavits and his disorganized manner in presenting his argument, together with his inability to find materials, was indicative of a serious lack of preparation. She found that this amounted to negligence.
[8] Finally, the application judge found that the Township incurred very significant costs as a result of various positions taken by Bickley and by his lack of preparation, which in some cases amounted to negligence.
[9] While there was no causal connection between the complaints and specific actual costs as shown in the Township’s bill of costs, the application judge held that nothing in rule 57.07(1) required that negligent or inappropriate conduct be related to specific costs. She held that an amount of 40 per cent of costs against Bickley’s was warranted.
[10] The primary issue on appeal is whether the application judge erred in ordering costs personally against Bickley. If she did not, a number of ancillary issues are raised. I must also fix costs of the appeal in C52704 as well as the costs of this appeal.
[11] For the reasons that follow, I am of the opinion that the application judge did err in ordering costs against Bickley personally. As a result, I would set aside the costs order against him. In view of my conclusion, I need not address the ancillary grounds of appeal.
B. Basis for a Costs Order Against a lawyer Personally: rule 57.07(1)
(1) General principles
[12] A lawyer whose conduct results in costs being incurred unreasonably, or wasted, may be deprived of his or her costs or required to pay the costs of any other party. Rule 57.07 deals with orders for costs against a lawyer personally:
(1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order,
(a) disallowing costs between the lawyer and client or directing the lawyer to repay to the client money paid on account of costs;
(b) directing the lawyer to reimburse the client for any costs that the client has been ordered to pay to any other party; and
(c) requiring the lawyer personally to pay the costs of any party.
(2) An order under subrule (1) may be made by the court on its own initiative or on the motion of any party to the proceeding, but no such order shall be made unless the lawyer is given a reasonable opportunity to make representations to the court.
(3) The court may direct that notice of an order against a lawyer under subrule (1) be given to the client in the manner specified in the order.
[13] The governing principles in awarding costs personally against a lawyer were set out by the Supreme Court of Canada in Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3, at pp. 135-136:
The basic principle on which costs are awarded is as compensation for the successful party, not in order to punish a barrister. Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay. It is clear that the courts possess jurisdiction to make such an award, often under statute and, in any event, as part of their inherent jurisdiction to control abuse of process and contempt of court.... [C]ourts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling. [Emphasis in original.]
[14] The court in Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (1998), 16 C.P.C. (4th) 201 (Ont. Gen. Div.), at para. 121, recognized that “the criteria on which an order for costs may be made against a solicitor personally pursuant to [r]ule 57.07 and pursuant to the inherent jurisdiction of the court may differ.” Accordingly, rule 57.07(1) is not simply a codification of the common law. Rather, it is designed to protect and compensate a party who has been subjected to costs being incurred without reasonable cause, not to punish a lawyer: see also Young, at p. 135.
[15] Similarly, in Carleton v. Beaverton Hotel (2009), 2009 CanLII 92124 (ON SCDC), 96 O.R. (3d) 391 (Div. Ct.), at para. 24, the court held that costs against a lawyer personally are intended to be compensatory and rule 57.07(1) “clearly speaks to the issue of compensating parties for unnecessary costs.” The court’s inherent power to order costs in rare cases for contempt or to control its officers in which punishment is an objective is a separate issue from a costs order under rule 57.07(1).
[16] Rule 57.07(1) is therefore not concerned with the discipline or punishment of a lawyer, but only with compensation for conduct which has caused unreasonable costs to be incurred.
(2) Legal test
[17] The court in Carleton, at para. 21, approved a two-part test to determine the liability of a lawyer for costs under rule 57.07(1).
[18] The first step is to inquire whether the lawyer’s conduct falls within rule 57.07(1) in the sense that it caused costs to be incurred unnecessarily. Rule 57.07(1) refers specifically to conduct that “caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default”. The court in Marchand held that mere negligence can attract costs consequences in addition to actions or omissions which fall short of negligence. The court confirmed that “bad faith” is not a requirement for imposing the costs consequences of rule 57.07(1) and concluded, at para. 122, that “[i]t is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to [r]. 57.07.”
[19] In determining whether a lawyer’s conduct falls within rule 57.07(1), the court must consider the facts of the case and the particular conduct which has been attributed to the lawyer: see Marchand, at para. 115.
[20] In Rand Estate v. Lenton, 2009 ONCA 251, [2009] O.J. No. 1173, at para. 5, this court noted that rule 57.07(1) requires an examination of “the entire course of litigation that went on before the application judge so that the application judge can put in proper context the specific actions and conduct of counsel.” This holistic examination of the lawyer’s conduct produces an accurate tempered assessment.
[21] Although the conduct as a whole must be considered, a court must consider specific incidents of conduct in determining whether the conduct falls within rule 57.07(1). In Carleton, the court confirmed, at para. 20, that a general observation “does not permit identification of what conduct may have contributed to delay and unnecessary costs.” Further, the absence of specific evidence or circumstances considered in making a general observation precludes meaningful appellate review of the criteria of rule 57.07(1). Above all, the legal test under rule 57.07(1) is not concerned with a lawyer’s professional conduct generally, but whether such conduct, including the conduct of the litigation, caused unreasonable costs to be incurred: Carleton, at para. 18.
[22] The second step is to consider, as a matter of discretion and applying the extreme caution principle enunciated in Young, whether, in the circumstances, the imposition of costs against the lawyer personally is warranted. The “extreme caution” principle, as stated in Young, means that “these awards must only be made sparingly, with care and discretion, only in clear cases, and not simply because the conduct of a lawyer may appear to fall within the circumstances described in [r]ule 57.07(1)”: Carleton, at para. 15.
C. Analysis
(3) Standard of review
[23] The determination as to costs is a matter within the discretion of the application judge. An appellate court may set aside a costs award if the application judge made an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.
[24] In Rand Estate, this court held, at para. 2, that:
The application judge who managed the proceedings was in a much better position than this court to make the necessary assessments underlying the findings of fact he eventually made. Those findings are, by their nature, somewhat subjective and the cold paper record cannot, in our view, capture all of the considerations that would be relevant to those findings. We defer to the [application] judge’s findings unless they are clearly in error and clearly material to his ultimate determination.
[25] As a result, this court owes a high degree of deference to the application judge’s holding that Bickley’s conduct caused costs to be unreasonably incurred and, in the particular circumstances, the imposition of costs against him personally was warranted.
(4) Whether Bickley’s conduct caused costs to be incurred unnecessarily
(a) Mayor Hill incident
[26] The application judge found, at para 67 of her reasons, that the “Mayor Hill incident ... clearly caused additional costs to this case.” The question is, however, whether Bickley personally caused the additional costs or whether he was acting as the agent of his clients.
[27] For over a year, Bickley sought to examine Mayor Hill. He first served a notice of examination of Mayor Hill in March 2009 seeking full disclosure. When advised that full disclosure of the documents sought had already been made, were protected by solicitor-client privilege, or were publicly available, he served a notice of motion to have Mayor Hill examined. In response, the Township filed a lengthy affidavit containing all the documents which set out details of how the By-law came to be, including the minutes of council meetings. Nothing was done until a year later when a notice of intention to call Mayor Hill as a witness was served. When the Township asked why this was necessary, the response was that Galganov and Brisson wanted to ensure the admissibility of a radio interview with Mayor Hill. The Township offered to consent to the admission of the transcript of that interview if the summons was revoked. This was refused. The Township then offered to have Mayor Hill examined out of court. This was also refused. The Township prepared a factum in anticipation of Bickley bringing a motion at trial. Bickley eventually changed his mind and said that he would not call Mayor Hill. The summons was revoked. The application judge commented that the evidence in issue was irrelevant to the matter.
[28] As I have indicated, and the application judge acknowledged, in determining whether the imposition of costs against a lawyer personally is warranted, a factor is whether the lawyer’s clients have waived solicitor-client privilege. A court should be cautious in awarding costs personally against a lawyer where it would be necessary to infringe on solicitor-client privilege: see Nazmdeh v. Ursel, 2010 BCCA 131, 3 B.C.L.R. (5th) 277, at para. 110. Solicitor-client privilege was not waived in this case. Bickley’s unchallenged affidavit contained a general denial, “that [he] acted at any step in the proceeding without the instructions and authority of [his] clients.” In addition, at para. 29 of his affidavit, Bickley responded in part to the allegation of the Township:
As I explained to counsel for the Township of Russell, my primary reason to cross-examine Mayor Ken Hill was to ensure the admissibility of the transcript of the radio interview with Mayor Ken Hill which took place on June 18, 2008 and to expand upon his positions. In seeking his attendance at the hearing, I deny that my intention was to “embarrass” Ken Hill as alleged by the Township of Russell in the within motion. At all times, I was following instructions of my client. [Emphasis added.]
[29] The application judge accepted Bickley’s assertion that he was prevented from responding to some of the allegations because of solicitor-client privilege and also that he took no step in the proceeding without the instructions and authority of his clients. Given this, it was incumbent on the application judge to consider not only whether the Mayor Hill incident caused unnecessary costs but whether, in doing so, Bickley was acting in his personal capacity or as an agent for his clients. The application judge made no attempt to distinguish Galganov and Brisson’s conduct from Bickley’s conduct. She erred in principle in failing to make such distinction. Their conduct must be assessed separately as Bickley should not be responsible for advancing a weak case if instructed to do so by Galganov and Brisson. Specifically, clients are not obliged to accept the judgment of their lawyer but are entitled to obtain the judgment of the court: see Walsh v. 1124660 Ontario Limited, 2007 CanLII 4789 (Ont. S.C.), at para. 23.
(b) Decision to propose Galganov as an expert witness in Brisson’s application as well as Dr. Winn
[30] After Bickley obtained leave to have the Brisson and Galganov applications heard together, Bickley proposed Galganov as an expert in Brisson’s application. The application judge commented, at para. 68 of her reasons, that: “The Township wasted time and money in cross-examining Mr. Galganov as to his ‘expertise’ and researching the state of the law on biased expert witnesses.” The application judge also rejected Dr. Winn, the other expert witness proposed by Galganov and Brisson and concluded that this amounted to “wasted time and money” on the part of the Township.
[31] In his affidavit, Bickley explained that the order providing for the applications to be heard together made it clear that it would be in the application judge’s discretion to determine whether the evidence submitted in one application could apply to the other. It was for this reason that he proposed to have Galganov provide expert evidence for use in Brisson’s application.
[32] It appears from Bickley’s affidavit that it was his idea to propose Galganov as an expert witness in the Brisson application although Galganov was an interested party and clearly lacked any qualifications as an expert. Such conduct would fall below the standard of care expected of a reasonably competent lawyer in Bickley’s position. Again, however, accepting his affidavit, his clients approved of it.
[33] The rejection of Dr. Winn is not in the same category and the application judge erred in attributing the proposal of this expert to Bickley rather than to Galganov and Brisson. While the application judge did not ultimately accept Dr. Winn as an expert, this does not mean he should never have been proposed. Nor does this mean that Bickley should be held personally responsible for the costs the Township incurred in cross-examining Dr. Winn and in preparing submissions against the admissibility of his evidence at trial. Hindsight cannot be used to evaluate Bickley’s decision: see Rand Estate, at para. 5.
(c) Attempted introduction of an article; erroneous reference to “rule 39.5”; and whether Bickley’s “negligence” added to costs
[34] Bickley sought to introduce an article that appeared to contradict some of the assertions of one of the Township’s experts, Dr. Castonguay, without an evidentiary foundation. After reviewing the article, Dr. Castonguay prepared a supplementary affidavit. The application judge did not permit the article to be entered as evidence.
[35] The application judge found that Bickley sought to convert the application to a trial under “rule 39.5”, which does not exist in the Rules of Civil Procedure, because he contested facts in the affidavits of the Township’s experts and contended they were not admissible. The Township was aware of Bickley’s position and prepared a factum in response to this argument. Eventually, after being directed to read Rule 39 of the Rules of Civil Procedure, Bickley agreed his position was not tenable. The application judge held that this was indicative of a lack of preparation which caused costs to be wasted.
[36] Overall, the application judge found, at para. 90 of her reasons, that “some time was wasted during the hearing, but very significant costs were incurred by the [Township] as a result of the various positions taken by Mr. Bickley, by his lack of preparation, which in some cases amounted to negligence.”
[37] In oral submissions before us, Bickley’s counsel submitted that the application judge’s reasons are contradictory because in subparagraph 84(7) of her reasons she held that:
Mr. Bickley’s disorganized manner of presenting his argument, together with his inability to find materials, did not add costs. However, this was clearly indicative of a serious lack of preparation amounting to negligence.
[38] The application judge’s comments in this subparagraph are in response to the Township’s allegation, at subparagraph 68(7), that, at the hearing, Bickley often could not find cases to which he referred, had not always brought the materials he needed with him and did not understand that the “joint” book of authorities filed by the Township referred to the Galganov and Brisson applications being heard jointly and were not intended for the joint use of counsel.
[39] While the reasons are not entirely clear, I am of the opinion that at para. 90 of her reasons, the application judge was referring to the Township’s complaints respecting Bickley’s conduct both before and at the hearing. At subparagraph 84(7) she was solely referring to the Township’s complaints of Bickley’s conduct at the hearing.
[40] In summarizing Bickley’s conduct at paras. 92 and 93 of her reasons, the application judge again appears to be referring to Bickley’s conduct prior to the hearing:
This situation is far different from the facts in Rand Estate v. Lenton, where discrete issues arose: for example, there was no merit to a particular will issue; or, there had been a particular motion which was found to be needless, and costs could be attributed to those specific events.
While a precise accounting would be preferable, the moving target presented by Mr. Bickley’s conduct of the case meant that positions, documents, and the law, had to be constantly examined, re-examined, and re-considered, only to then find a particular position was changed, a motion would not be brought, a stated ground not argued at the hearing, etc. – all over a period of two years. The prime example is the to-ing and fro-ing over the cross-examination of Mayor Hill. Mr. Bickley directly and negligently caused additional costs to be incurred. [Citations omitted.]
[41] Reading the reasons as I have, the application judge’s reasoning is not entirely contradictory. While there may be some overlap in her reasoning, her decision to order costs against Bickley personally is mainly based on his conduct vis-à-vis the Township prior to the hearing.
(5) Whether an award of costs should have been made against Bickley
[42] The application judge’s decision to award costs personally against Bickley is based on the cumulative effect of what she found to be his negligent conduct which caused the Township to incur costs unnecessarily. As I have indicated, the application judge erred in principle in respect of the Mayor Hill incident by not separating Bickley’s conduct from that of his clients. She also erred in using hindsight with respect to the costs related to proposing Dr. Winn as an expert. These incidents are so important to, and so intertwined with, her overall conclusion, that the award of costs against Bickley personally must be set aside. I cannot discretely quantify what remains nor am I of the opinion that, even if Bickley were negligent, his conduct would merit an award of costs against him personally, given the dictate of the Supreme Court of Canada in Young.
[43] Finally, if an order of costs is to be made against a lawyer personally on the basis of negligence, then that negligence must be based on a breach of the objective standard of care of a reasonably competent lawyer in the same position. Here, that position would be of a lawyer acting on instructions or with the approval of his clients. The court must also bear in mind to whom the lawyer’s duty of care is owed. That duty is primarily to the client and to the court. The rule was not intended to allow the frustration of the opposing party’s counsel to be taken out against a counsel personally because he or she went down a series of blind alleys with his or her clients’ instructions or approval. Rather, resort is to the general principles governing costs between parties, which include deterrence of unnecessary steps that unduly prolong litigation: see 1465778 Ontario Inc. v. 1122077 Ontario Ltd., (2006) 2006 CanLII 35819 (ON CA), 82 O.R. (3d) 757 (C.A.). The application judge appears to have taken the “blind alley” factor into account in awarding party and party costs of the litigation.
D. Conclusion
[44] For these reasons, I would allow the appeal respecting the order of costs against Bickley personally and set it aside. In view of my conclusion, it is unnecessary for me to deal with the ancillary issues raised.
[45] I would award Bickley the costs of the motion before the application judge, the motion for leave to appeal and this appeal on a partial indemnity basis. I would fix those costs at $25,000, inclusive of disbursements and all applicable taxes, and order that those costs be paid by the Township.
Released: June 15, 2012
“KMW” “Karen M. Weiler J.A.”
“I agree Robert Sharpe J.A.”
“I agree R.A. Blair J.A.”
[^1]: Galganov and Brisson retained independent counsel for their written submissions regarding the quantum of costs, Mr. Martin Mason of Gowling Lafleur Henderson LLP. They were represented by Mr. Mason on the motion for costs against Bickley personally, while Mr. Allan O’Brien and Ms. Ashley Deathe represented Bickley. Gowling Lafleur Henderson LLP also represents Galganov and Brisson in their underlying appeal. Although this was a motion for costs, that motion was further to the application and for consistency, I refer to the judge at first instance in C52704 and in these reasons as the “application judge”.
[^2]: All references hereinafter to the application judge’s reasons refer to the reasons reported at 2011 ONSC 3065.