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Little guys win in SCC costs rulings

|Written By Michael McKiernan

The Supreme Court of Canada ruled in favour of the little guy in two major costs decisions this month.

Gordon Turriff says courts are adopting different costs standards in expropriation cases.

An Alberta farmer won his long fight for full legal costs in a dispute over land expropriated from him by a pipeline company, and the court also upheld an interim costs order to a francophone Albertan in his constitutional challenge over unilingual court documents.

In Smith v. Alliance Pipeline Ltd., released Feb. 11, a unanimous court awarded Vernon Joseph Smith costs on a solicitor-client basis throughout a dispute over farmland expropriated by Alliance. The Alberta farmer had been through two arbitration panels and a superior court action in his effort to force the company to pay for reclamation work on his land.

“Only this type of award can indemnify Mr. Smith as best one can for the inordinate amount of money - to say nothing of time - he has had to invest in what should have been an expeditious process,” wrote Supreme Court Justice Morris Fish. “Mr. Smith should not be made to bear the costs of what is clearly a test case for the respondent.”

The case dates back to 1998, when Alliance was granted approval by the National Energy Board to build pipeline across Smith’s land. The pipeline was completed a year later, but reclamation work on the land, agreed in the expropriation, was not. Smith did the work himself and sent Alliance the bill, but it refused to pay in full, and the matter went to arbitration.

An arbitration panel heard the case in 2003, but in the meantime, Alliance needed to gain access to Smith’s land to complete maintenance work. After Smith asked for compensation upfront, Alliance applied to the Alberta Court of Queen’s Bench for unhindered access to his land.

That motion was denied and Smith was awarded party-and-party costs, which amounted to less than 25 per cent of what he had paid defending the action. Alliance didn’t drop the case until March 2005, by which time a panellist in the arbitration panel was appointed to the bench, forcing them to start that process all over again.

A second arbitration panel awarded Smith partial costs from the first arbitration proceeding and ordered Alliance to pay his remaining costs for defending the motion in court. That award was upheld on judicial review in the Federal Court, but Alliance appealed again to the Federal Court of Appeal, arguing the Court of Queen’s Bench had the authority to award full costs, but chose not to.

Alliance won that appeal, but the Supreme Court overturned it, highlighting the special circumstances of expropriation law, which tends to favour full indemnity for costs associated with the transaction. Since all of Smith’s costs grew out of a single claim for compensation related to expropriated land, the arbitration panel’s award was reasonable, found Fish.

Gordon Turriff, an expert in litigation costs, says while courts may be unwilling to award solicitor-and-client costs unless the losing party behaved “reprehensibly,” he says courts in several provinces have adopted a different standard in expropriation cases.

“This is a policy decision by [the] Supreme Court of Canada, which is really dressed up as an administrative law case,” says Turriff. “For a very long time, it’s been regarded as appropriate for somebody whose land has been taken, not to have to pay anything out of his or her own pocket in order to be treated fairly. Now we have a statement confirming that principle that is applicable across the country.”

Turriff says the confusion could have been avoided had the National Energy Board Act been more explicit about the type of costs awards that should be made in expropriation cases, rather than its broadly framed instruction that companies pay “all legal, appraisal, and other costs” incurred in a claim for compensation.

“If you use the phrase ‘legal costs,’ it’s going to create an ambiguity about whether it means solicitor-and-client costs, or party-and-party costs. I happen to know that because I’ve been reading costs cases for 30 years, but other people wouldn’t necessarily understand that there’s a special language for costs,” he says.

In the second case, R. v. Caron, released Feb. 4, the Supreme Court upheld an interim costs order by the superior court in Alberta that ordered the province to fund Gilles Caron’s constitutional challenge to a charge on the grounds of public interest, even though he was defending a regulatory prosecution in the Provincial Court of Alberta.

Caron was being prosecuted for a minor traffic offence, making a wrongful left turn, when he claimed the proceedings were a nullity, since the court documents were entirely in English.

Eighteen months into the provincial court proceedings, Caron ran out of money, and applied for interim costs. The Provincial Court made the order, but the province appealed. The decision was set aside by the Alberta Court of Queen’s Bench, which ruled the Provincial Court had no jurisdiction to award interim costs. Caron’s lawyer, Rupert Baudais, a Regina-based associate with Miller Thomson LLP, then took the unusual step of asking the superior court to approve funding for a trial in a lower court.

“I told the court: ‘You have just decided the Provincial Court doesn’t have the authority to make this order, but in the interests of justice, somebody must have the authority to do it. You’re the court of inherent jurisdiction. I’m asking you,’” says Baudais.

The superior court agreed it had jurisdiction to make the order, and did so. Another unanimous Supreme Court upheld that decision.

“Such orders must be highly exceptional and made only where the absence of public funding would work a serious injustice to the public interest,” wrote Supreme Court Justice Ian Binnie.

In this case, it would be “contrary to the interest of justice if the proper resolution of this case on the merits was forfeited just because Mr. Caron - the putative standard bearer for Franco-Albertans in this matter - lacked the financial means to complete what he started,” Binnie said in the decision.

“We’re very happy with the decision, and for Caron, it’s very important,” says Baudais. “Alberta was trying to have the orders which we had obtained declared void and asked the court for him to pay the money back, which no ordinary citizen can do.”

The merits of the case are now before the Alberta Court of Appeal, which has not yet scheduled a date for arguments.

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