COURT FILE NO.: 99-CV-166969
DATE: 20130927
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MICHELLE JOSEF, Applicant
AND:
THE ONTARIO MINISTER OF HEALTH, and THE ATTORNEY GENERAL OF ONTARIO, representing HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, Respondents
BEFORE: D.L. Corbett J.
COUNSEL: James K. McDonald and Cynthia Petersen, for the Applicant
Arif Virani, for the Respondent
HEARD: November 1, 2012
ENDORSEMENT
D.L. CORBETT J.
[1] This is a motion for costs.
[2] Ms Josef suffered from gender identity disorder (GID). She sought sex reassignment surgery (SRS). On October 1, 1998, Ontario enacted a regulation terminating OHIP funding for SRS. This application was commenced by Ms Josef to challenge this regulation.
[3] These proceedings have a long history – they were commenced in 1999. They were held in abeyance after election of a new government in 2003, to see if there might be a change in policy. There was not. The application was held in abeyance again on consent in 2005, pending release of the Human Rights Commission’s decision in Hogan (discussed below). In 2006 the litigation resumed.
[4] Substantial costs were incurred in this litigation. Applicant’s counsel assembled and filed a ten volume joint application record. There were six days of cross examinations. Numerous experts were involved. The applicant filed a long and sophisticated factum that reflected considerable time and skill. Ontario was due to file its factum on May 31, 2008, and the application argued on the merits in late June 2008.
[5] Ontario did not file its factum by the deadline. Then, three days later, on June 2, 2008, Ontario repealed the impugned regulation. OHIP funding for SRS was thereby reinstated. The application was adjourned on consent, and has not been argued on the merits.
What Remains of the Application
[6] Ms Josef funded the first stage of her SRS procedure at a cost of $600. She could not afford the rest of the surgery, which would have cost $22,000. After the impugned regulation was repealed, she underwent the rest of the surgery and OHIP paid for it. Thus Ms Josef now has a claim for $600 and a claim for “general damages”.
[7] A future government could de-list the services once again, and some other person with GID would be put to the expense, time and trouble of challenging that change. Obtaining a decision that would serve as a precedent to prevent this from recurring was a key goal of Ms Josef’s litigation.
[8] Counsel for Ms Josef candidly acknowledges that a claim for general damages is not likely to succeed, and that the claim for $600 is too small to justify proceeding with the application. The central issue in the case has been resolved in Ms Josef’s favour by the change in government policy.
[9] Ontario does not agree that the litigation has been resolved in Ms Josef’s favour. There was a change in government policy. The change in policy is not a concession that the government was legally obliged to make the change it did. And it is not an admission of liability for failing to make the change earlier.
A. The Position of the Parties
1. Is Ms Josef Entitled to Costs?
[10] Ms Josef seeks her costs on the basis that she has achieved almost all of what she set out to do. She has prevailed by change of policy rather than court order. She is deprived of her day in court and in obtaining a court decision that could prevent de-listing of SRS in future. She should recover her costs thrown away.
[11] Ontario argues that Ms Josef has not prevailed in the litigation and thus is not entitled to her costs. In the alternative, court should decide the merits of the underlying application prior to determining whether Ontario is liable for costs.
[12] Ms Josef argues that it would not be proper to decide the merits just to decide costs. However, she would prefer to have a hearing on the merits than to be denied her costs thrown away.
2. On What Scale Should Costs Be Awarded?
[13] Ms Josef seeks costs on a substantial indemnity basis. Ontario says that there has been no misconduct that would justify a punitive costs order.
3. Quantum of Costs
[14] Ms Josef claims roughly $261,000 in substantial indemnity costs, including taxes. Ontario says this costs claim is much too high.
[15] Ontario argues that this is not a case of first impression (because of the Human Rights Commission proceedings in Hogan v. Ontario). Ontario also notes that much of the expert evidence in this case was also before the Human Rights Commission in Hogan, and so it should not have been expensive to elicit that evidence again in this proceeding.
B. Disposition
[16] There are no issues of substance remaining in this case. Ms Josef’s position is reasonable that the case should be considered over.
[17] It is not appropriate to decide the merits as a condition precedent to deciding costs. The tail does not wag the dog. The court will not decide moot issues in order to decide costs.
[18] In the unusual circumstances of this case, Ms Josef should have her costs. This is to indemnify her (and her counsel) for costs thrown away. The change in public policy has deprived Ms Josef of her day in court, and denied her the opportunity to establish the precedent for which she initiated and pursued the proceedings. That is one of the risks of suing the government. However, she should have her costs thrown away as a result of a change in government policy.
[19] There is no misconduct in the litigation by Ontario to merit a punitive costs award. Costs shall be on the usual partial indemnity scale.
[20] The bill of costs reflects the work that was actually done and I accept it. This was sophisticated public interest litigation, and it is no surprise that it was expensive. The court expects cases such as this one to be pursued thoroughly. Expert counsel is expensive. There is no reason costs should be reduced below the usual quantum of partial indemnity costs. I fix partial indemnity costs at $200,000 inclusive.
C. Analysis
Issue #1 – Should Any Costs Be Awarded?
[21] It is clear that the court has the jurisdiction to award costs here. Section 131(1) of the Courts of Justice Act provides that “the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court”.[^1]
[22] Usually costs are awarded upon a judicial determination of a proceeding or a step in a proceeding. But s.131(1) does not require that a proceeding or step in a proceeding be decided judicially for a costs award to be made. Where the central issue in the case is rendered moot because the government repeals impugned legislation, costs may be awarded:
I am of the view that the fact that no order was made in this case… does not preclude an award of costs.
It is within the Court’s inherent jurisdiction to order costs, even when the proceeding is rendered moot and no order is made. The issue, therefore, is whether the circumstances of this case are such that I ought to exercise my discretion to so order.[^2]
[23] I place weight on the parties’ respective offers to settle. In 2006, before repeal of the impugned regulation, Ontario offered to pay or reimburse the costs of Ms Josef’s SRS and to pay her costs on a partial indemnity basis. Ms Josef would not settle without also an order declaring the impugned regulation of no force or effect, so that the result she achieved would also be available to others.
[24] In 2006, Ontario was prepared to pay costs, but not to agree in a consent court-ordered change in policy. Now it has unilaterally enacted the change of policy, but will not agree to pay Ms Josef’s costs.
[25] Ms Josef served an offer to settle on the basis of Ontario repealing the impugned regulation, and reinstating funding for SRS on the same or less restrictive basis as applied in April 1998. The applicant did not include any payment of damages as part of her offer, and her offer was silent as to costs. In repealing the regulation, Ontario has acceded to almost everything in Ms Josef’s offer to settle.
[26] Rule 57.01 sets out factors the court may take into account in exercising its discretion under s.131 of the Courts of Justice Act. These include the results of the proceeding, any offers to settle, the complexity of the proceeding and the importance of the issues. I accept the applicant’s submissions that in this case:
(a) The applicant has been substantially successful in the result achieved, albeit through change of government policy rather than court order;
(b) The proceedings were complex and raised matters of public importance;
(c) The terms of both the applicant’s and Ontario’s offers to settle weigh in favour of ordering costs;
(d) Other equitable considerations, and in particular the government’s change of policy almost on the eve of the hearing, had the effect of depriving the applicant of a decision on the merits of the central issue in the case, which meant that effectively, all her costs were thrown away.
[27] Consideration (d) may be viewed in two ways. If one were to infer that the change of policy arose, at least in part, because of this application, then the costs were not “thrown away”. Rather, they achieved substantially the result they were trying to achieve. But in this event the applicant would be entitled to costs on ordinary costs principles, for having “won”. If, on the other hand, one does not draw an inference linking this application and the change of government policy, then truly the costs have been thrown away entirely. Either way, it would be inequitable to require the applicant, or her solicitors, to bear personally the financial consequences of the government’s decision.
[28] In Broomer v. Ontario, a similar situation arose, and the applicants were awarded their partial indemnity costs. In Broomer, the applicants challenged a regulation that disentitled them permanently from social assistance because they had been convicted of offences related to their benefits. The Broomer case was substantially prepared, but had not yet been heard on the merits, when the government repealed the impugned regulations. The parties subsequently settled all issues other than costs.
[29] The Broomer applicants were awarded their costs on the following basis:
Where one of the respondents, Attorney General of Ontario, undertakes an act that obviates the necessity for continuation of the application, because the applicant has achieved what it wanted, that respondent cannot then argue that the applicants were not successful. The respondent government took away the opportunity for the applicants to win their case. The applicants had their entitlement to benefits restored, which was the end result they sought. The respondents cannot, in effect, pull the rug out from underneath their opponent by acceding to their position and then arguing that their position had no merit. The applicants position did have merit. In amending the legislation, the government agreed it did.[^3]
[30] The court in Broomer also noted the strong public policy reasons for awarding costs in a case such as this:
While these findings may in themselves provide grounds for awarding costs to the applicants, their strongest reasons for success lie in their public policy argument. As several courts have recognized, costs “can be used as an instrument of policy and that making Charter litigation accessible to ordinary citizens is recognized as a legitimate and important public policy objective.”[^4]
None [of the applicants], obviously, is in any position to fund a Charter application of this nature. The only way the Charter challenge to the legislation at issue could proceed was through the pro bono intervention of lawyers experienced in this area of law. It is therefore appropriate to award costs to lawyers acting in this capacity in order to encourage them to continue taking on cases of this nature. Their continued participation in pro bono work ensures that disadvantaged citizens, such as these applicants, receive access to justice.[^5]
[31] All of these points apply with equal force to the case before me. Ms Josef could not afford to fund her $22,000 surgery, let along the costs of this proceeding. But for the pro bono representation by Ms Petersen and her firm, Ms Josef would not have been able to bring her Charter challenge. Access to justice demands that costs thrown away in a case such as this be payable. Otherwise the lawyers who undertake this work will end up bearing the costs personally, which would be simply unfair.
[32] When counsel undertakes a file such as this one, she bears the risk that she may lose and get paid little or nothing. She knows that if she wins, the most she can hope for in most cases is an award of partial indemnity costs. This is not a typical contingency fee arrangement, where a loss brings nothing but a win brings a risk premium. In cases such as this one, a loss brings nothing, and a win brings the smaller opportunity loss of recovering less than one’s usual fees.
[33] Courts are swift to extol the virtues of making legal services available, and the duty and valour of working on a pro bono basis. These sentiments are pious and empty if costs awards devalue pro bono work. Courts do not, as a rule, award enhanced costs to a party because she is represented on a pro bono basis. But neither should courts penalize that party by reducing the costs award because her counsel was willing to undertake the risk of not being paid at all if the case was unsuccessful.
[34] These proceedings were complex and of public importance. De-listing of SRS did not affect a lot of people. A handful of people undergo this surgery every year in Ontario. The surgery costs around $22,000 per person: expensive for an individual but not material in the aggregate to the overall funding of healthcare. The costs of these proceedings have been high relative to the amounts in issue for both sides. But that does not reduce the importance of the case.
[35] Ontario argues that this is not a case of first impression, because of the proceedings in Hogan v. Ontario. It argues that “there is no basis to conclude that the Applicant’s Charter challenge has a real possibility of success”. I disagree.
[36] Hogan was a proceeding before the Ontario Human Rights Tribunal. The same regulation was in issue, but on different (albeit overlapping) legal bases. An appeal from the tribunal to the Divisional Court was pending at the time that the impugned regulation was repealed. The parties had agreed to hold that appeal in suspension until the trial decision in the case at bar. The two proceedings were complementary, advancing alternative legal attacks on the same legislation. Both are aptly described as public interest litigation.[^6]
[37] It is not appropriate for me to venture far into the merits. However, there is evidence upon which a court could conclude that persons with GID are a small minority. Only a handful of people each year undertake SRS in Ontario. Their condition is often trivialized and misunderstood. The impugned regulation was targeted specifically at SRS, rather than SRS de-listing being a small part of an overall realignment of OHIP scheduled services. The change was not initiated through the usual “bottom-up” process of consultation between the Ministry and health professionals.
[38] Drawing lines between insured and uninsured services is an important part of the government’s stewardship over health care funding. It attracts judicial deference. And yet, in this instance, the costs savings are small, the target group vulnerable and historically subject to marginalization, and the circumstances fraught. Certainly the applicant had a “real possibility of success” in her claim for declaratory relief.
Issue #2 – Scale of Costs
[39] I do not consider that the offers to settle bear on the issue of the proper scale of costs. The government is not an ordinary litigant. I consider that the ordinary costs consequences of refusing to accept an offer to settle are not triggered when one of the terms of the offer requires the government to adopt a particular public policy. Accordingly, I am not inclined to award substantial indemnity costs on the basis that Ontario has capitulated on the terms offered by Ms Josef.
[40] I agree with Ontario that it has done nothing in the conduct of these proceedings that would warrant a punitive costs order. Counsel for both Ontario and Ms Josef have conducted themselves honourably and professionally throughout.
[41] I agree with the applicant that in public interest litigation, substantial indemnity costs may be awarded even where there has been no misconduct.[^7] However, I consider this case to be closer to Broomer than Schacter or Okanagan. In Broomer, costs were awarded on a partial indemnity basis.
[42] I conclude that costs should be on the ordinary scale of partial indemnity, and not on an enhanced scale of costs.
Issue #3 – Quantum of Costs
[43] I do not accept that this case was derivative of Hogan. The two proceedings moved forward in tandem, and were different legal approaches to the same policy issues. The cases were related, and efforts were made to manage each with an eye to the other. But they were complementary rather than duplicative. I accept that expert evidence in Hogan was available for this case. And I accept that counsel for Ontario made reasonable concessions to promote the cost-efficieny in these proceedings. However, I conclude that these points are reflected in the bill of costs. $261,000 seems a large number, but it is actually modest for a case of this kind. Had comparable efforts been expended on a commercial case, at commercial rates, I would expect the totals to be much higher.
[44] I accept the summary of time provided by applicant’s counsel. I consider it reasonable for a case of this importance and significance. I consider the hourly rates claimed on a substantial indemnity basis to be reasonable. And I accept the disbursements as claimed (roughly $21,000).
[45] Under our current system, a case such as this can be brought and conducted properly when counsel agrees to act a pro bono basis.[^8] Counsel agrees to receive little or nothing from the claimant by way of fees, and will have to be satisfied with whatever can be raised by donations and any costs award at the end of the case. Costs awards will not be enhanced in cases such as this, to fill a perceived gap in funding public interest litigation. But neither should costs awards be reduced in these cases. The ordinary principles should apply in determining the appropriate quantum to be paid.
[46] I fix partial indemnity costs at $200,000, inclusive.
Conclusion
[47] This application was commenced by the applicant in good faith. It was pursued in good faith. It was advanced by counsel for the applicant with a high degree of competence, diligence and professionalism. There is no reason why the applicant or her counsel should personally bear the costs of all this work, undertaken in good faith, because the government decided to change its position after nine years, practically on the eve of a hearing on the merits. All those costs have been thrown away. Ontario shall pay them, on a partial indemnity basis, fixed at $200,000, payable within fourteen days.
Costs
[48] The applicant has succeeded on this motion and should be entitled to her costs of the motion. If the parties cannot agree on these costs, then they shall make written submissions, the applicant with 14 days and the respondent within 14 days thereafter. This schedule may be amended on consent of the parties provided that all costs submissions reach me no later than November 30, 2013.
Delay in Releasing this Decision
[49] I regret the long delay rendering this decision. I have been on an extended medical absence following a heart attack in August 2012, and a premature return to work in October to December 2012. I have just resumed work full-time; hence the delay.
D.L. Corbett J.
Released: September 27, 2013
COURT FILE NO.: 99-CV-166969
DATE: 20130927
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
MICHELLE JOSEF
Applicant
- and –
ONTARIO MINISTER OF HEALTH et al.
Respondents
ENDORSEMENT
D.L. CORBETT J.
Released: September 27, 2013
[^1]: Courts of Justice Act, R.S.O. 1990, c.C-43, s.131(1).
[^2]: Vukelich v. The Warden of the Mission Institute, 2002 BCSC 495 (B.C.S.C.), per Boyd J.
[^3]: Broomer v. Ontario (Attorney General), 2004 27253 (Ont. Div. Ct.), per Ferrier and O’Connor JJ. (Matlow J. dissenting).
[^4]: Quoting here from Epstein J. (as she then was) in Rogers v. Sudbury (Administrator of Ontario Works) (2001), 2001 28087 (ON SC), 57 O.R. (3d) 467 (S.C.J.).
[^5]: Broomer, op. cit., at paras. 14 and 15.
[^6]: See British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, PHS Community Services Society v. Canada (Attorney General), 2008 BCSC 1453, affd. 2010 BCCA 15, and Ahousat Indian Band and Nation v. Canada (Attorney General), 2010 BCSC 1552.
[^7]: For example, Schacter v. Canada, 1992 74 (SCC), [1992] 2 S.C.R. 679, at p.726.
[^8]: The nineteenth century meaning of “pro bono” was without fee. That meaning has not had currency in Ontario civil proceedings for at least two generations. It now means “without commercial fee from the client”. Acting pro bono is no bar to raising funds for the legal challenge from the public or receiving payment by way of a costs award.