Court of Appeal for Ontario
CITATION: Sarnia (City) v. River City Vineyard Christian Fellowship of Sarnia, 2015 ONCA 732
DATE: 20151030
DOCKET: C58676
Doherty, Epstein and Tulloch JJ.A.
BETWEEN
The Corporation of the City of Sarnia
Respondent (Applicant)
and
Trustees of River City Vineyard Christian Fellowship of Sarnia
Appellant (Respondent)
Murray Klippenstein and Kent Elson, for the appellant
Joseph J. Hoffer and Laura M. McKeen, for the respondent
Reema Khawja and Cathy Pike, for the intervener, Ontario Human Rights Commission
Additional reasons concerning costs to the judgment reported at Sarnia (City) v. River City Vineyard Christian Fellowship of Sarnia, 2015 ONCA 494, 39 M.P.L.R. (5th) 29, allowing the appeal by the appellant (respondent).
COSTS ENDORSEMENT
Overview
[1] These reasons follow this court’s decision dated July 3, 2015, in which the appellant, Trustees of River City Vineyard Christian Fellowship of Sarnia (“River City”), was successful in its appeal. River City now seeks its costs for both the appeal and the proceedings below, submitting that it should be awarded costs on a full indemnity basis in the amount of $163,479.54.
[2] The respondent, the Corporation of the City of Sarnia, submits that no costs should be awarded, as this appeal stems from public interest litigation. In the alternative, if costs are to be awarded, they should be fixed at a nominal amount of only $10,000.
[3] For the reasons that follow, we are of the view that costs should follow the event and be awarded to River City on a partial indemnity basis fixed in the amount of $90,000, inclusive of H.S.T. and disbursements.
A. Facts
[4] River City is a church in the City of Sarnia. It has operated a men’s homeless shelter in its church basement since 2006. Sarnia opposed its operation on the basis that it breached the City’s zoning by-law, By-law No. 85 of 2002 (the “By-law”). River City disagreed and continued to operate the shelter.
[5] Sarnia applied to the Superior Court for an injunction to stop the operation of the shelter. River City brought a counter-application seeking a declaration that it was not contravening the By-law. River City further argued that, to the extent the By-law did prohibit the shelter, the By-law unjustifiably infringed on its freedom of religion as protected by the Canadian Charter of Rights and Freedoms. In 2014, the applications judge issued an injunction against River City, prohibiting it from operating the shelter because it contravened the By-law, and dismissed River City’s Charter claim.
[6] On appeal, this court held that the applications judge erred in his interpretation of the By-law. River City’s operation of the homeless shelter did not contravene the By-Law. The shelter falls within the meaning of “church-sponsored community activities and projects” in the By-law when the words are read in their entire context and according to their grammatical and ordinary meaning.
[7] As a result, it was not necessary to address the Charter claim. This court allowed the appeal and dismissed Sarnia’s application for an injunction. The parties were then invited to make written submissions on the costs of the appeal.
[8] At the Superior Court, Carey J. determined that both parties would be responsible for their own costs, despite the City of Sarnia’s initial success. At para. 28 of his reasons, he stated:
I have found the church's position that good works are part of their theological mandate to be sincerely held. The City has conceded that point. The church is a charitable enterprise and has invested over $100,000 into the shelter which has done much good. There was a novel legal issue here that was not frivolous and the church was relying on case law from neighbouring American jurisdictions that gave support to their position. The City has presumably much greater resources than the church and if not awarded their costs, although successful, will not be substantially disadvantaged. In the circumstances, both parties will be responsible for their own costs.
[9] River City now submits that costs should be awarded on a full indemnity basis. It requests $163,479.54 in full indemnity costs for the application and appeal. In support, it submits that it is a public interest litigant with a small annual budget of $350,000 and no pecuniary interest in the proceeding. River City was motivated by a desire to continue its good work for the benefit of the community. Further, it raised important issues. In the alternative, River City requests its costs on a partial indemnity basis in the amount of $124,859.17.
[10] The City of Sarnia, in response, submits that it too is a public interest litigant, exercising its obligation to enforce its By-law reasonably and in good faith, and that it would be appropriate for the court to award no costs in this matter. Should the court find that this is not an appropriate case to order no costs against the unsuccessful party, Sarnia requests that River City’s costs be fixed at $10,000 for the appeal and no costs for the application.
[11] Below, we discuss why there are insufficient reasons to depart from the general rule that partial indemnity costs should be awarded to the successful party. We deal first with River City’s request for full indemnity, then discuss Sarnia’s submission that it is also a public interest litigant and that the appropriate order would be to award no or minimal costs against it. Finally, we consider r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and the reasonable amount of the award.
B. Issues
Is River City entitled to costs on a full indemnity basis?
Is the City of Sarnia, the unsuccessful party, required to pay the usual partial indemnity costs order?
What is the appropriate quantum of the costs award?
C. Analysis
(1) River City is not entitled to costs on a full indemnity basis
[12] In exercising the court’s discretion on costs, the basic rule is that costs on a partial indemnity scale follow the event: Bell Canada v. Olympia & York Developments Ltd. (1994), 17 O.R. (3d) 135 (C.A.). The general principle when an appeal is allowed is that the costs below and of the appeal are awarded to the successful appellant: St. Jean (Litigation Guardian of) v. Cheung, 2009 ONCA 9, 45 E.T.R. (3d) 171, at para. 4.
[13] Elevated costs are warranted by operation of an offer to settle under r. 49.10 of the Rules of Civil Procedure or where the losing party has engaged in behavior worthy of sanction: Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at para. 28. Here, there were no relevant offers to settle. Furthermore, neither party alleged any reprehensible conduct by the other.
[14] Courts have also, on occasion, awarded full indemnity costs when the action was of exceptional public interest and special considerations justified the order: see, for example, PHS Community Services Society v. Canada (Attorney General), 2008 BCSC 1453, 302 D.L.R. (4th) 740, aff’d 2011 SCC 44, [2011] 3 S.C.R. 134.
[15] In Carter v. Canada (Attorney General), 2015 SCC 5, [2015] 1 S.C.R. 331, the Supreme Court modified the test for an award of advance costs previously set out in British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371, and applied it to the consideration of special costs. At para. 140, the Supreme Court provided guidance on the exercise of judicial discretion when considering special costs in cases involving public interest litigation:
First, the case must involve matters of public interest that are truly exceptional. It is not enough that the issues raised have not previously been resolved or that they transcend the individual interests of the successful litigant: they must also have a significant and widespread societal impact. Second, in addition to showing that they have no personal, proprietary or pecuniary interest in the litigation that would justify the proceedings on economic grounds, the plaintiffs must show that it would not have been possible to effectively pursue the litigation in question with private funding. In those rare cases, it will be contrary to the interests of justice to ask the individual litigants (or, more likely, pro bono counsel) to bear the majority of the financial burden associated with pursuing the claim.
[16] It is our view that the circumstances of this case do not involve matters of public interest that are truly exceptional. We agree that the constitutional argument raised by River City – that its religious freedoms would be infringed by shutting down the shelter – was a novel issue. It was also a reasonable alternative position to advance in the context of the litigation. However, in our view, the issue did not have a significant and widespread societal impact. It was not of exceptional public importance. Furthermore, issues of public importance do not automatically entitle a litigant to preferential treatment with respect to costs: Little Sisters Book & Art Emporium v. Canada (Commissioner of Customs & Revenue Agency), 2007 SCC 2, [2007] 1 S.C.R. 38, at para. 35.
[17] Here, the issues and the impact of the proceedings were relatively narrow. It was unnecessary to consider the Charter argument in light of the analysis of the By-law. The outcome affected only the parties and the constituents they served and represented. The constitutional issue was not of comparable significance or high public interest as, for example, physician-assisted suicide in Carter or safe injection facilities in PHS.
[18] Almost all constitutional litigation is of some public importance. The Supreme Court cautioned, however, against special costs becoming routine in public interest litigation: Carter, at para. 137. Therefore, in the circumstances of this case, we do not see any basis for deviating from the general rule that partial indemnity costs be awarded to the successful party.
(2) The unsuccessful party, the City of Sarnia, is required to pay a costs award
[19] The City of Sarnia submits that it should be exempt from the ordinary rule that costs follow the event. Its argument is based on the five factors set out in St. James’ Preservation Society v. Toronto (City) (2006), 272 D.L.R. (4th) 149 (Ont. S.C.), rev’d on other grounds, 2007 ONCA 601, 286 D.L.R. (4th) 146. These factors are as follows:
a) The nature of the unsuccessful litigant;
b) The nature of the successful litigant;
c) The nature of the dispute – was it in the public interest;
d) Has the litigation had any adverse impact on the public interest; and
e) The financial consequences to the parties.
[20] I will elaborate on the St. James’ criteria.
a) The nature of the unsuccessful litigant
[21] Here, Sarnia is a municipality that was acting on behalf of its constituents and in good faith to enforce its by-laws. Sarnia had a genuine interest in this litigation and there were no other potential litigants who were better suited to have brought the application. It had no pecuniary interest in the litigation. However, the City of Sarnia was not a public interest litigant. It was faced with a challenge to the interpretation of one of its by-laws, and brought an injunction in Superior Court to defend its position. This is central to its functions as a municipality. In other words, just because the City serves the public does not mean that any litigation in which it finds itself is public interest litigation.
b) The nature of the successful litigant
[22] Like Sarnia, River City had no pecuniary interest in this proceeding. It is a charitable enterprise that was motivated by a desire to benefit the community, and used its own funds to do so. River City had invested $100,000 into the shelter to ensure compliance with building and fire requirements. Its yearly revenue for 2013 and 2014 was approximately $350,000, and it ran a deficit in both of these years.
[23] In addition, River City is a private actor that was required to participate in this litigation. In St. James, Ducharme J. commented that it is more difficult to justify depriving a successful private actor, rather than a government actor, of the costs order they would normally receive in public interest litigation: at para. 23. We agree. This is precisely the case in these circumstances, and in our view, this factor weighs heavily against Sarnia in the determination of whether they should be exempt from an ordinary costs order.
c) The nature of the dispute – was it in the public interest?
[24] The applications judge found that this case raised a “novel legal issue” and therefore departed from the normal cost rules that would have required River City to indemnify Sarnia, the successful party at the Superior Court proceeding. As mentioned, the novel issue was River City’s argument that zoning by-laws prohibiting shelters violate their right to religious freedom under s. 2(a) of the Charter. River City raised this argument to counter the injunction application brought by Sarnia. Though it was not necessary to decide the Charter issue, it was one of public importance and was reasonably brought in the circumstances of the litigation.
[25] Though its position was not devoid of merit, Sarnia’s interest in enforcing a zoning By-law was narrow and did not extend beyond the immediate interests of its constituency. Sarnia did not raise an issue of practical significance to the public at large: see St. James, at para. 29.
[26] Sarnia relies on Guelph (City) v. Wellington-Dufferin-Guelph Health Unit, 2011 ONSC 7523, 97 M.P.L.R. (4th) 105, as an example in which an unsuccessful litigant, the City of Guelph, was excused from paying costs because it was acting in the public interest. That case, however, involved the process that must be followed by health boards in assigning spending to public health, and the spending priority that public health should be given in relation to education, recreation, and community matters. Price J., at para. 25, described these as issues which “were of significance not only to the City of Guelph and the Board of Health, but to municipal governments and boards of health across the province.” Another consideration in Guelph was that the plaintiff City was a principal funding member of the defendant Board of Health. Therefore, without any costs order being made against it, the City of Guelph was going to be required to pay 46% of the Board’s costs if the legal expenses exceeded their base budget. This is not the case for Sarnia and River City. In our view, the public interest issues in Guelph were of broader significance than those raised by Sarnia, and the circumstances distinguish the two situations.
d) Whether the litigation had any adverse impact on the public interest
[27] Neither party behaved in a way that was vexatious, frivolous or abusive. The litigation by Sarnia was necessary to clarify the scope and interpretation of the By-law, and the Charter claim was reasonably brought by River City.
e) The financial consequences to the parties
[28] The City of Sarnia’s resources are significantly greater than River City’s. Sarnia’s 2013 financial statements indicate that the city had revenue of over $109 million and an accumulated surplus of over $521 million in that year. As mentioned, River City operates on a very small budget of approximately $350,000 per year. It would not have been able to fund a lawsuit of this magnitude without the pro bono assistance of counsel. River City would be substantially disadvantaged should no costs be awarded, despite its success on appeal. It is inappropriate in this case for River City and its pro bono counsel to bear a financial burden that is normally transferred, in part, to the unsuccessful party.
Conclusion
[29] In applying these criteria to this case, the City’s only compelling argument is that it had no pecuniary interest in the litigation. Without more, the City of Sarnia, the unsuccessful party, should not be excused from paying a normal costs award.
(3) The reasonable quantum of the costs award
[30] In light of our conclusions on River City’s request for full indemnity and Sarnia’s request for a no costs order, there is no reason to depart from the normal rule that costs follow the event.
[31] In considering the quantum, r. 57.01(1) outlines the factors that the court may consider in exercising its discretion. We also note the principle expressed in Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.), at para. 26: “[T]he objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigation.”
Costs of the Application
[32] River City claims $94,414.32 for its costs of the application. In our view, it would not be fair and reasonable to order Sarnia to pay this amount.
[33] At its core, this matter involved the interpretation of a by-law. There was a secondary Charter argument, but it turned out to be irrelevant. Regardless, the Charter argument was not particularly complicated.
[34] In deciding what is fair and reasonable, the expectation of the parties concerning the quantum of a costs award is a relevant factor: Boucher, at para. 38; r. 57.01(1)(0.b). Sarnia’s partial indemnity costs for the application were $60,030.05. The amount claimed by River City involved over 400 hours of work in preparation for the application. Despite the need to prepare for the Charter argument first heard before the applications judge, this total is difficult to justify.
[35] Taking into consideration the various factors set out in Boucher, River City is entitled to its costs in the amount of $60,000, inclusive of H.S.T. and disbursements, for the application.
Costs of the Appeal
[36] River City was wholly successful on appeal and requests $34,444.85 in partial indemnity costs. The time spent by counsel was significantly less than for the application, as all of the same arguments made before the applications judge were made before us. Again, despite the Charter argument, the matter was not complicated.
[37] The expectation of the parties concerning the quantum of a costs award is relevant. Sarnia’s costs for the appeal were $40,235.46. Both parties have therefore sought large amounts in their bills of costs. Considering Boucher, r. 57.01(1), and the reasonable expectations of the parties, we are of the view that $30,000, all inclusive, is a fair and reasonable costs award for the appeal.
D. Conclusion
[38] In all the circumstances, we would grant River City’s request for partial indemnity costs in the total amount of $90,000, inclusive of H.S.T. and disbursements.
“Doherty J.A.”
“Gloria Epstein J.A.”
“M. Tulloch J.A.”