Court File and Parties

Court File No.: 07-CV-342974PD3
Date: 2012-12-21
Superior Court of Justice - Ontario

Re: Sydney Charendoff and Marla Charendoff, Plaintiffs, Responding Parties

And: Alec McLennan and 124155 Canada Inc., Defendants, Moving Parties

Before: MacDonnell, J.

Counsel: All parties are now self-represented

Heard: In writing

COSTS ENDORSEMENT

[ 1 ] On October 1, 2012 I granted the motion of the defendants for an order setting aside the default judgment granted to the plaintiffs on September 2, 2008. I have now received the written submissions of the parties in relation to what costs, if any, should be paid to the defendants in relation to that motion.

[ 2 ] The defendant Alec McLennan is a lawyer. The defendant 124155 Canada Inc (“124155”) is a company incorporated by Mr. McLennan. It appears that the sole function of the company was to administer Mr. McLennan’s law practice by issuing cheques and paying bills. He was the president and director of the company, and he signed the cheques on its behalf.

[ 3 ] The plaintiffs allege that they were clients of Mr. McLennan, that on his advice they loaned approximately $400,000.00 to another of his clients, and that the loan was not repaid as required under the loan agreement. On November 2, 2007 they commenced an action against both Mr. McLennan and 124555 for recovery of the funds. The statement of claim was served on McLennan and 124155 on November 7, 2007.

[ 4 ] Since that date, the action has had a tortuous history. The part of the history that was relevant to the merits of the set-aside motion was set out in my endorsement of October 1, 2012. Suffice it to say that the plaintiffs had the defendants noted in default at a time when they were not in default, that they proceeded ex parte to obtain judgment based on the alleged default, and that the parties then became mired in a procedural morass for almost four years.

[ 5 ] The plaintiffs were represented by counsel until shortly after the default judgment was set aside. At no point did McLennan retain counsel to act for him or 124155. Throughout the entirety of this litigation, he has acted for himself and his company.

[ 6 ] Having succeeded on the motion, Mr. McLennan and 124555 seek costs in the amount of $34,090.93. That amount is made up of counsel fees of $29,625.00, disbursements of $659.01, and HST in the amount of $3,806.93. In his written submissions in support of the request for costs, Mr. McLennan made no mention of and no allowance for the fact that he and his company have always been self-represented.

[ 7 ] In Fong v. Chan, 1999 2052 (ON CA), [1999] O.J. No. 4600 (C.A.), Sharpe J.A. noted that the “the preponderance of modern authority supports the contention that both self-represented lawyers and self-represented lay litigants may be awarded costs and that such costs may include allowances for counsel fees”. [^1] Justice Sharpe observed, however, that a successful self-represented litigant does not have an automatic right to costs, and that “the matter remains fully within the discretion of the trial judge…” [^2] Further, he stated:

[S]elf-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. [^3]

[ emphasis added ]

[ 8 ] The importance of proof that an opportunity cost was suffered was made clear by the Divisional Court in Mustang Investigations v. Ironside, 2010 ONSC 3144. In that case, the plaintiff brought a motion for leave to discontinue an action against the self-represented defendant. The motion was granted, and the question was what costs if any the defendant was entitled to recover. The motions judge was satisfied the defendant had done work that would ordinarily have been done by a lawyer and he determined that in the particular circumstances of the case this was sufficient to justify an award of costs notwithstanding the absence of proof that an opportunity cost had been incurred. Speaking for the Divisional Court, Jennings. J. held that the motions judge had erred. He stated:

In my opinion, the language used by Sharpe J.A. [in Fong v. Chan ] 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. [^4]

[emphasis added]

[ 9 ] Jennings. J. noted that several courts had interpreted Fong as leaving open the potential for a costs award to a self-represented litigant in the absence of proof of an opportunity cost if another rationale for an award of costs was engaged. He referred, for example, to White v. Ritchie , [2009] O.J. No. 2360 (Sup. Ct.) , where the defendants had employed delaying tactics aimed at wearing down the self-represented plaintiff. In that case, Newbould J. stated:

It would be wrong … to disentitle [the plaintiff] 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… To disentitle [him] to costs for the time spent by him would be to immunize the [defendants] against their inappropriate behaviour simply because [he] is a self-represented litigant. I would not so immunize them. I would substantially reduce the amount to be paid to [him], however, because of his lack of proof of specific lost income. [^5]

[ 10 ] In his reasons in Mustang Investigations, Justice Jennings implicitly if not explicitly held that Newbould J. had erred. He stated:

As I have said… 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 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… 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. [^6]

[emphasis added]

[ 11 ] Subsequent decisions of this court have strictly applied the ‘no proof of opportunity cost, no…costs available’ rule articulated by Justice Jennings. For example, in Cohlmeyer v. Ffrench, 2012 ONSC 755, Mulligan J. stated that “it is incumbent on the [self-represented] litigant to show to the court a lost opportunity cost wherein they gave up remunerative employment to pursue the litigation.” He noted that the claimant in that case acknowledged that he was unable to do so: “he pursued his career as a financial advisor and could not provide any information to indicate he had lost any income during this period”. [^7]

[ 12 ] Similarly, in Tiago v. Meisels, 2012 ONSC 5990, Stinson J. stated:

The basic submission of the plaintiffs is that they devoted considerable time and effort to do the work that would ordinarily be done by a lawyer retained to conduct the litigation. They assert that they could otherwise have been earning income from website development and other communications services. They filed no evidence of lost opportunities or the income they might have earned during the time they devoted to the litigation…

In Ontario, a judge may exercise his or her discretion to award costs to a self-represented litigant only if (1) the litigant devoted time and effort to do the work ordinarily done by a lawyer; and (2) that as a result she or he incurred an opportunity cost by foregoing remunerative activity…

To meet the second part of the test, a self-represented litigant must prove that he or she gave up remunerative activity…

Although they filed a nine-page response to the defendants' submissions, accompanied by several appendices, at no time have the plaintiffs tendered proof of the opportunity costs incurred by them by reason of the time they spent working on the litigation….

In light of the plaintiffs' failure to provide evidence or proof supporting their claim for lost opportunity costs, I am unable to award the nominal costs otherwise provided for under the legal authority binding on me in Ontario. I therefore award no costs to the plaintiffs in respect of their personal time devoted to the litigation. [^8]

[ 13 ] See also Glencairn Gold Corp. v. Canadian Committee to Combat Crimes Against Humanity, 2010 ONSC 4282 (Roberts, J.).

[ 14 ] With those principles in mind, I turn to the claim for costs in the case at bar. There is no doubt that in preparing for the set aside motion Mr. McLennan did work that would ordinarily be done by a lawyer retained to conduct the litigation. However, the material filed to support the claim for costs is silent in relation to the question of opportunity cost. The issue was squarely raised by the plaintiffs in their written submissions, which were delivered almost two months ago. No further material was filed by the defendants in response to those submissions. The cases I have referred to make it clear that it will not be assumed that an opportunity cost has been incurred. I do not read Fong as taking a different position where the self-represented litigant happens to be a lawyer. What Fong did is extend the lost opportunity principle, which had been used to justify awarding costs to self-represented lawyers, to all self-represented litigants. In other words, Fong put all self-represented litigants into the same boat in relation to the criteria for an award of costs. It is no more obvious that lawyers who choose to act for themselves will have to forego other remunerative activity than it is for individuals with other employment. Accordingly, if self-represented lawyers wish to obtain costs orders, they must establish that they did in fact suffer the loss of an earnings opportunity.

[ 15 ] Even if the loss of an earnings opportunity can be assumed in some cases, I would not make such an assumption here. There is no basis upon which it could reasonably be inferred that Mr. McLennan had to decline other remunerative activity in order to work on his own case. I am not prepared to assume that he was in any different position in that respect than the self-represented litigants who were denied costs in Mustang Investigations , Cohlmeyer or Tiago.

[ 16 ] The rule articulated by Justice Jennings on behalf of the Divisional Court is binding and there is no reason not to apply it in this case.

[ 17 ] In any event, even if I were persuaded that the defendants were entitled to some allowance for the time that Mr. McLennan devoted to the preparation of the set-aside motion, I would regard the amount claimed as excessive. For example, 22 of the 83 hours that Mr. McLennan included in his costs outline were attributable to his preparation and attendance for cross-examination on the affidavit he filed as a party to the motion. He would have had to attend personally for that cross-examination whether or not he had retained counsel. As Sharpe J.A. observed in Fong , “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”. [^9]

[ 18 ] Further, the claim for compensation at an hourly rate of $375.00 is unjustifiable. In Fong , Sharpe J.A. held 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… [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.” [^10] In Mustang Investigations , Jennings. J. stated that where an opportunity cost was proved, the self-represented litigant could only recover “nominal” costs. [^11] In my view, $375.00 per hour is far beyond a moderate or nominal amount.

[ 19 ] Finally, while my criticism of the conduct of counsel for the plaintiffs was made clear in my earlier endorsement, I also noted the somewhat pedestrian approach that the defendants took to setting aside the noting in default. A great deal of expense and time could have been saved had the defendants moved expeditiously to rectify the problem. On balance, if I were persuaded that the defendants were entitled to costs, I would not have awarded more than $3000 for this fairly straightforward motion.

[ 20 ] However, for the reasons I have stated, I am not persuaded that the defendants are entitled to any costs beyond their disbursements of $659.01. The plaintiffs shall pay that amount to the defendants within 30 days.

MacDonnell, J.

Date: December 21, 2012

[^1]: At paragraph 23
[^2]: At paragraph 27
[^3]: At paragraph 28
[^4]: At paragraph 23
[^5]: At paragraph 18
[^6]: At paragraph 27
[^7]: At paragraph 13
[^8]: At paragraphs 4, 6, 7, 9
[^9]: At paragraph 28
[^10]: ibid
[^11]: At paragraph 27