Costs to Unrepresented Litigant

Mustang Investigations v. Ironside et al, 2010 ONSC 3444 (Div. Ct).

Thanks to Alex Lacko, articling student, for preparing this case summary.

The plaintiff appealed from a costs order in which 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 parties made written submissions as to costs. Mustang submitted that Ironside should receive costs limited to disbursements in a net amount of $1,541. Ironside delivered two bills of costs, the larger one for $208,138.40, inclusive of disbursements. The motion judge disallowed $87,500 claimed by Ironside as being not a proper claim for costs. The motion judge then considered the leading authority on costs to be awarded to unrepresented litigants, Fong v. Chan (1999), 46 O.R. (3d) 330, (C.A.). The motion judge correctly set forth the two principles enunciated by Sharpe J.A. and the Court of Appeal in that case in the following language:

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 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.

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.

The issue on appeal was whether the motion judge applied the correct principles for awarding costs to a self-represented litigant.

Jennings J. delivered the judgment of the Divisional Court and found that a number of cases, while purporting to apply Fong, in fact introduced a “spin” on Sharpe J.A.’s proviso to the second principle which he found troubling.

Jennings J. found that the motion judge 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.

Justice Jennings stated that the language used by Sharpe J.A. was clear and that in order to receive costs, a lay litigant must demonstrate (1) that he or she devoted time and effort to do the work ordinarily done by a lawyer, and (2) that as a result, the litigant incurred an opportunity cost by foregoing remunerative activity. He further stated that 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.

Several trial judges as well as a master, 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. Jennings J. wrote that:

“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.”

Jennings J. further stated that in the case that an injustice will result, he had two responses:

(1) It is difficult to see any injustices 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.

The appeal was allowed and the award of $20,000 for counsel fee on a partial indemnity basis was set aside.