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Judge calls for changes to civil costs rules

|Written By Siobhan McClelland

Debate over whether unsuccessful parties should have to file bills of costs has a Toronto judge calling for changes to the Rules of Civil Procedure.

The decision may result in ‘Toronto judges forcing counsel to comply with the rules with a bill of costs at the hearing,’ says David Sterns.

In his reconsideration decision in Re Estate of Ruth Smith; Smith v. Rotstein, Superior Court Justice David Brown suggested it’s time for a change to the rule on costs.

Although the Ontario Court of Appeal has held there’s no requirement that a losing party who isn’t seeking costs has to file a bill of costs, Brown commented that the civil rules committee should consider amending Rule 57.01 in order to allow judges the ability to order an unsuccessful party on a motion or trial to do so.

Rule 57.01(6) requires all parties who intend to seek costs at a proceeding to exchange cost outlines at the hearing. But problems arise in more complex motions or trials where judges reserve their decisions and the parties don’t address costs on the day of the proceeding.

In these circumstances, the rules don’t require an unsuccessful party to deliver a cost outline, making it difficult for judges to determine what costs are reasonable.

“There’s certainly an advantage to the court in both sides making their costs submissions at the conclusion of argument before the decision is rendered,” says Colin Stevenson of Stevensons LLP, adding that this enforces reasonableness on both parties before the court makes a decision. But he notes this isn’t practical in all cases.

David Sterns of Sotos LLP says the issue is the question of when parties should have to submit their bills. “To me, the better time to force a party to show their cards is before the decision has been rendered.”

At that point, he says that as neither party knows what the outcome will be, they’re more likely to be realistic.

But once the court renders a decision, Sterns says there’s too much selectivity in preparing a bill to expect the losing party to put down a realistic figure. “In order for a bill of costs to be a good benchmark, it’s really important that the people doing them have complete neutrality.”

The issue first arose at the conclusion of Brown’s initial decision in which he granted partial summary judgment in an estates matter. At the end of his decision, Brown asked that the unsuccessful party, Nancy-Gay Rotstein, file a bill of costs with her cost submissions. She failed to do so.

In his initial costs decision, Brown noted that since Rotstein didn’t provide a bill of costs, he inferred that the fees she incurred approximated those submitted by the successful party, Lawrence Smith.

Brown placed little weight on Rotstein’s critique of Smith’s costs given that she didn’t provide a bill. Brown awarded Smith $707,173 on a full indemnity basis.

Rotstein appealed the decision. The appeal court found that “there is no requirement for the losing party, who is not seeking costs, to file a bill of costs although it is preferable that he or she does so.”

However, the court went on to say that if the losing party chooses not to file a bill of costs, “this is a factor that the judge, who is assessing costs, may take into account when considering the reasonable expectations of the losing party.”

The appeal court referred the matter back to Brown as he had erred in not considering the rest of Rotstein’s cost submissions because of her failure to file a bill of costs.

In his reconsideration decision, Brown noted in obiter that judges in the Toronto region haven’t been insisting on vigorous compliance with the rule requiring counsel to bring cost outlines to hearings.

While Brown wrote that part of the solution was for the judiciary to enforce the rule more, he also indicated that for cases where a judge reserves on a complex matter, “it might well be appropriate for the civil rules committee to consider an amendment to Rule 57.01 which will authorize a judge to order an unsuccessful party on a motion or at a trial to file a bill of costs, or costs outline, as part of its responding cost submissions.”

Sterns agrees that most judges, particularly in Toronto, aren’t enforcing the rule on exchanging cost outlines at the hearing. “Lawyers in Toronto, particularly on contested motions, are hedging their bets,” he says.

“I don’t think that amendment [to the rules] is necessary, but what this decision may well result in is Toronto judges forcing counsel to comply with the rules with a bill of costs at the hearing.”

Stevenson also doesn’t believe there’s any need to change the rules. He notes that in some cases, one side will have more work than the other and points out that in class actions, defendants have higher disclosure obligations and end up spending more money than plaintiffs.

Richard Shekter, who was counsel for Smith, also notes parties can have large cost disparities, particularly in personal injury cases. He says that in some personal injury cases, plaintiffs’ counsel will retain many experts and spend weeks, if not months, preparing for trial.

The reality, he adds, is that insurers don’t like spending a lot of money on the defence. The problem is that the discrepancy in time and costs between the two sides could hurt a plaintiff if the courts consider only the costs incurred.

“It’s always way more difficult for a plaintiff to present a case than for a defendant to respond to it,” he says.

“It’s a two-edged sword, but the lesson I take from it is you have to be scrupulous about maintaining and organizing your time.”

For background information on the case, see "Appeal court orders costs review in fractious $1.2M estates dispute."

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