6 August 2019By Uri Snir
In its recent decision in Hunt v. Worrod,1 the Ontario Court of Appeal set aside an order for costs against Legal Aid Ontario (“LAO”). The Court found that, as a government sponsored funder of legal aid, LAO is not required to assess the merits of the cases it funds.
Background: In June 2011, Kim Hunt suffered a catastrophic brain injury in an ATV accident. His sons, Justin and Bradley, were appointed his guardians of property and personal care.
In the years prior to his accident, Kim had an on-again, off-again relationship with Kathleen Worrod. They had jointly purchased a home in June 2010. In December 2010, they entered into an agreement, pursuant to which Kim paid Kathleen for her share of the down payment on the property. However, title to the property was never formally transferred into Kim’s name alone.
Three days after Kim’s release from the hospital in October 2011, he married Kathleen.
In their capacity as litigation guardians, Kim’s sons commenced an application against Kathleen seeking a declaration that the marriage was void ab initio (as Kim did not have the capacity to marry), and that Kim was the sole owner of the property that had not been transferred to his name.
LAO granted Kathleen a legal aid certificate and funded her legal fees throughout the proceedings.
At trial, Kim succeeded on all claims. The application judge declared the marriage void ab initio, granted Kim sole equitable title to the property, and permanently prohibited all contact between Kim and Kathleen.
The April 2018 Costs Order: Kim’s litigation guardians sought costs against Kathleen, Kathleen’s counsel, and LAO.
In his reasons on costs, the application judge characterized Kathleen’s defence as “meritless” and ordered her to pay costs of $385,279.54 on a full recovery basis.
The application judge also ordered costs of $192,639.77 against LAO. The application judge found that LAO knew that Kim was a vulnerable individual and that it failed to properly carry out its mandate to monitor the proceedings (which constituted an abuse of process). As such, it contributed significantly to the hardships and challenges faced by Kim and his family, and needlessly wasted judicial resources.
The application judge was not prepared to make a similar order for costs against Kathleen’s lawyer, as the court was not privy to the privileged communication between Kathleen, her lawyer, and LAO. As such, there was no basis for finding that Kathleen’s lawyer acted improperly in satisfying his reporting requirements to LAO.
The Court of Appeal Sets Aside Order for Costs Against LAO: The Court of Appeal explained that courts have an inherent jurisdiction to order costs against non-parties. However, such orders should be made sparingly and only where a non-party engages in an abuse of process.
The Court of Appeal found that the application judge had no evidentiary support for his conclusion that LAO’s conduct amounted to an abuse of process. Without evidence of something more, such as bad faith or improper purpose in granting funding to a litigant, LAO’s conduct, including its monitoring of the litigation, could not support a finding of abuse of process.
The Court held that LAO is an independent and publicly accountable non-profit corporation. It must be viewed within the context of its statutory mandate under the Legal Aid Services Act.2 LAO does not represent the client or direct the litigation; rather, it provides funding to the client to retain a lawyer. It then relies on the opinions of the lawyer who has carriage of the file. The legal aid system is not established on the basis that LAO is required to engage in a detailed factual and legal analysis of the matter to determine its merit.
The Court of Appeal explicitly distinguished LAO from the legal framework governing third-party litigation funding, which attempts to address concerns regarding the potential harm to the administration of justice that may arise from a non-party profiting unduly from another’s litigation.
The Court of Appeal also held that even if LAO’s failure to monitor could be classified as an abuse of process, any such conclusion would require the impermissible review of the reporting letters provided to LAO by Kathleen’s lawyer. Such reporting letters are solicitor-client privileged.
The application judge had correctly concluded that he could not order costs against Kathleen’s lawyer due to solicitor-client privilege but failed to apply that same logic and reasoning to LAO.
The Takeaway: With this decision, the Court of Appeal has made it extremely difficult for litigants in Ontario to obtain an order for non-party costs against LAO.
Although this could leave many successful litigants unable to recover their legal costs, the alternative would potentially jeopardize the legal aid regime in this province. If LAO were required to scrutinize the factual and legal basis of its clients’ claims, it would divert LAO’s already limited resources toward monitoring costs and risk aversion. In April, the Ontario government announced a 30-per-cent cut in funding to LAO. It would also require LAO to seek waivers of privilege from its clients in order to defend against potential claims for non-party costs. The overall result would erode access to justice.
1 2019 ONCA 540
2 1998, S.O. 1998, c. 26.