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The Sighting of a Rare Beast: Interim Costs

Costs are the bane of the losing litigant and a constant concern for litigation counsel. Under our “loser pays” principle the threat of paying a winning opponent’s legal costs in addition to one’s own is a bitter pill to swallow; more so as predicting a costs award is notoriously difficult given the inherently discretionary nature of the court’s jurisdiction to award costs. Indeed, it is this very unpredictability that often leads the reasonably minded litigant to settle rather than litigate, which is exactly what is desired. The threat of costs forces objective thinking in order to manage risk which in turn should bring some efficiency to the allocation of judicial resources to private litigants.

In some situations, costs may do more than provide compensation for an action unnecessarily brought or continued1 – an award of costs may be made at an early stage of a proceeding, in essence, to help fund the litigation of a party with few resources but a good case. This is called “interim costs” and is the exception to the rule. The Supreme Court of Canada has held that “[c]oncerns about access to justice and the desirability of mitigating severe inequality between litigants also feature prominently in the rare cases where interim costs are awarded.  An award of costs of this nature forestalls the danger that a meritorious legal argument will be prevented from going forward merely because a party lacks the financial resources to proceed.”2 Normally such interim costs awards appear in family law matters3 as a way to level the playing field4 where the weaker party has a meritorious claim.5 On occasion, interim costs are also available in corporate and bankruptcy proceedings on the same principle.6

Recently my colleagues Gregory Sidlofsky and James Dunphy were successful in obtaining interim costs in the estates context. Here too costs now normally follow the termination of the litigation and are assessed on the “loser pays” principle.7 In Re Goutzioulis Estate; Goutzioulis-Lavoy v. Goutzioulis,8 the litigation involved a Will challenge and an application for dependant’s support. The Objector moved for the appointment of an Estate Trustee During Litigation and interim costs. On the latter point, the Hon. Mr. Justice Cavanagh agreed that the case was a suitable one for an order for interim costs in the amount of $187,871.40. Cavanagh J. reasoned:

[16] As I have noted, on August 18, 2020, Justice Conway found that the support Cathy had received from the Deceased established a prima facie case for dependents’ support. The court accepted that Cathy’s expenses far exceeded her income and that she satisfies the “needs criterion” of the test. Frank submits that Justice Conway was not informed that Cathy intended to sell her house when this order was made. It is not clear from the record that Cathy did so intend when the motion before Conway J. was heard. I do not find that Cathy failed to make proper disclosure of her financial affairs before Justice Conway.

[17] Cathy has provided evidence that she does not have money to buy food, utilities or gas. She was required to sell her home to meet her expenses. Cathy is unemployed, and her CERB entitlements have ended. Cathy’s evidence is that the equity from the sale of her home is insufficient to satisfy her debts.

[18] Frank submits that Cathy would be able to obtain funding for this litigation from her brother Stephan or his wife, and that I should draw an adverse inference from her refusal to produce her communications with him. I disagree. Cathy’s interests are not fully aligned with those of Stephan because she claims dependent support which, to the extent this is awarded, would reduce Stephan’s interest in the estate. Cathy’s evidence is that she was able to borrow money on the security of her home. With the sale of her house, she is no longer to use it as collateral for a loan. I decline to draw an averse inference as requested.

[19] I am satisfied that Cathy has shown that she is impecunious in that without an order for interim costs, she would not have the financial means to proceed with the litigation. Cathy has shown that she has a prima facie case that she is a dependent and entitled to support, which was accepted by Justice Conway when she made an order for interim support.

Such an award of interim costs may be exceptional but, as Cavanagh J. held, the party seeking costs had a meritorious case and would otherwise be unable to pursue her claim for dependant’s support. The result nicely aligns with family law cases that take a similar approach and is unquestionably one that highlights access to justice as a pillar of the civil litigation system much as was highlighted in Justice Osborne’s 2007 report as part of the Civil Justice Reform Project which lead to changes to the Rules of Civil Procedure.

 

Footnotes
  1.   Ryan v. McGregor (1925), 58 O.L.R. 213 (App. Div.); cf. Fong v. Chan (1999), 46 O.R. (3d) 330 at para. 22 (Ont. C.A.).
     
  2.   British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71 at para. 31 (S.C.C.).
     
  3.   See Goddard v. Goddard, 2009 CanLII 14042 (Ont. S.C.J.).
     
  4.   Stuart v. Stuart (2002), 24 R.F.L. (5th) 188 at paras. 9, 14 (Ont. S.C.J.).
     
  5.   Lynch v. Lynch (1999), 1 R.F.L. (5th) 309 (Ont. S.C.J.).
     
  6.   See generally Organ v. Barnett (1992), 11 O.R. (3d) 210 (Ont. Gen. Div.); Ebbinghaus Electric Ltd. v. Robby Ebbinghaus Ltd. (1997), 36 O.T.C. 64 (Ont. Gen. Div.); Thomas v. Thomas Health Care Corp, 2014 ONSC 1692 (Ont. S.C.J.).
     
  7.   “The modern approach to awarding costs, at first instance, in estate litigation recognises the important role that courts play in ensuring that only valid wills executed by competent testators are propounded.  It also recognises the need to restrict unwarranted litigation and protect estates from being depleted by litigation.  Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation;” McDougald Estate v. Gooderham, 2005 CanLII 21091 at para. 85 (Ont. C.A.).
     
  8.   As yet unreported; Ont. S.C.J. court file no. 05-107/20, a decision of Cavanagh J. released February 3, 2021.
     

Professor C. David Freedman

David Freedman LLB, MA, PhD, TEP is Counsel to our firm.

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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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