Civil Litigation - Costs - Interim. British Columbia (Minister of Forests) v. Okanagan Indian Band
In British Columbia (Minister of Forests) v. Okanagan Indian Band (SCC, 2003) the Supreme Court of Canada reviewed the law of interim costs:
(4) Interim Costs
31 Concerns 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. That costs orders can be used in this way in a narrow class of exceptional cases was recognized early on by the English courts. In Jones v. Coxeter (1742), 2 Atk. 400, 26 E.R. 642 (Ch.), the Lord Chancellor found that “the poverty of the person will not allow her to carry on the cause, unless the court will direct the defendant to pay something to the plaintiff in the mean time”. Invoking the “intirely discretionary” equitable jurisdiction to order costs, he ordered costs to be paid to the plaintiff “to empower her to go on with the cause” (p. 642).
32 The discretionary power to award interim costs in appropriate cases has also been recognized in Canada. An extensive discussion of this power is found in Organ v. Barnett (1992), 1992 CanLII 7433 (ON SC), 11 O.R. (3d) 210 (Gen. Div.). Macdonald J. reviewed the authorities, including Jones, supra, and concluded that “the court does have a general jurisdiction to award interim costs in a proceeding” (p. 215 (emphasis in original)). She also found that that jurisdiction was “limited to very exceptional cases and ought to be narrowly applied, especially when the court is being asked to essentially pre‑determine an issue” (p. 215).
33 As Macdonald J. recognized in Organ, supra, at p. 215, the power to order interim costs is perhaps most typically exercised in, but is not limited to, matrimonial or family cases. In McDonald v. McDonald (1998), 1998 ABCA 241 (CanLII), 163 D.L.R. (4th) 527 (Alta. C.A.), Russell J.A. observed that the wife in divorce proceedings could traditionally obtain “anticipatory costs” to enable her to present her position (para. 18). This was because husbands usually controlled all the matrimonial property. Since the wife had “no means to pay lawyers, her side of the litigation would not be advanced, and this position was patently unfair” (para. 20). Interim costs will still be granted in family cases where one party is at a severe financial disadvantage that may prevent his or her case from being put forward. See, e.g., Woloschuk v. Von Amerongen,  A.J. No. 463 (QL), 1999 ABQB 306, where the Alberta Court of Queen’s Bench ordered a lump sum payment of $10,000 to the mother in a custody action by way of interim costs, finding that the father’s financial position was “significantly better than that of the [mother] in terms of funding this protracted lawsuit” (para. 16); and Roberts v. Aasen,  O.J. No. 1969 (QL) (S.C.J.), also a custody case, where the court held that the father was unlikely to succeed at trial and that the mother lacked the resources to pay her legal fees and disbursements, and ordered the father to pay $15,000 as interim costs. Orkin, supra, at p. 2-23, observes that in the modern context “the raison d’tre [sic] of such awards is to assist the financially needy party pending the trial; they are made where the spouse is without resources and would otherwise be unable to obtain relief in court” (citations omitted).
34 Interim costs are also potentially available in certain trust, bankruptcy and corporate cases, where they are awarded for essentially the same reason — to avoid unfairness by enabling impecunious litigants to pursue meritorious claims with which they would not otherwise be able to proceed. Organ was a corporate case involving, among other causes of action, an action under the oppression remedy set out in s. 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16. The statute also provided in s. 249(4) that interim costs could be awarded in an oppression case. Macdonald J. held that, in addition to this express statutory power, the court also had an inherent jurisdiction to award interim costs. In the particular circumstances of this case, however, she held that the order should not be granted, because by their own admission the plaintiffs were not impecunious and would be able to proceed to trial without it. In Amcan Industries Corp. v. Toronto-Dominion Bank,  O.J. No. 3014 (QL) (Gen. Div.), a bankruptcy case, Macdonald J. acknowledged “the inherent unfairness that arises in choking a plaintiff’s action if access to funds is not permitted” (para. 39); in this case, again, interim costs were not awarded because impecuniosity was not established. In Turner v. Telecommunication Workers Pension Plan (2001), 197 D.L.R. (4th) 533, 2001 BCCA 76, an action for breach of fiduciary duty in respect of a pension fund, the British Columbia Court of Appeal recognized that the court had the power to award interim costs, but held that the interests of justice did not require it to do so on the facts of the case. Newbury J.A. noted that the financial position or impecuniosity of a party is not in itself reason enough to depart from the usual rules as to costs (para. 18).
35 Based on the foregoing overview of the case law, the following general observations can be made. The power to order interim costs is inherent in the nature of the equitable jurisdiction as to costs, in the exercise of which the court may determine at its discretion when and by whom costs are to be paid. This broad discretion may be expressly referred to in a statute, as in s. 131(1) of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43, which provides that costs “are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid”. Indeed, the power to order interim costs may be specifically stipulated, as in the Ontario Business Corporations Act or similar legislation in other jurisdictions. Even absent explicit statutory authorization, however, the power to award interim costs is implicit in courts’ jurisdiction over costs as it is set out in statutes such as the Supreme Court of British Columbia Rules of Court, which provides that the court may make orders varying from the usual rule that costs follow the event.
36 There are several conditions that the case law identifies as relevant to the exercise of this power, all of which must be present for an interim costs order to be granted. The party seeking the order must be impecunious to the extent that, without such an order, that party would be deprived of the opportunity to proceed with the case. The claimant must establish a prima facie case of sufficient merit to warrant pursuit. And there must be special circumstances sufficient to satisfy the court that the case is within the narrow class of cases where this extraordinary exercise of its powers is appropriate. These requirements might be modified if the legislature were to set out the conditions on which interim costs are to be granted, or where courts develop criteria applicable to a particular situation where interim costs are authorized by statute (as is the case in relation to s. 249(4) of the Ontario Business Corporations Act; see Organ, supra, at p. 213). But in the usual case, where the court exercises its equitable jurisdiction to make such costs orders as it concludes are in the interests of justice, the three criteria of impecuniosity, a meritorious case and special circumstances must be established on the evidence before the court.
37 Although a litigant who requests interim costs must establish a case that is strong enough to get over the preliminary threshold of being worthy of pursuit, the order will not be refused merely because key issues remain live and contested between the parties. If the court does decide to award interim costs in such circumstances, it will in a sense be predetermining triable issues, since it will have to decide that one side will receive its costs before it is known who will win on the merits (and since the winner is usually entitled to costs). As a result, concerns may arise about fettering the discretion of the trial judge who will eventually be called upon to adjudicate the merits of the case. This in itself should not, however, preclude the granting of interim costs if the relevant criteria are met. As Macdonald J. noted in Organ, supra, the court’s discretion must be exercised with particular caution where it is being asked to predetermine an issue in this sense, but it does not follow that the court would be going beyond the limits of its discretion if it were to grant the order. I therefore disagree with the conclusion of the New Brunswick Court of Queen’s Bench in New Brunswick (Minister of Health and Community Services) v. G. (J.) (1995), 1995 CanLII 11039 (NB QB), 131 D.L.R. (4th) 273, that costs cannot be ordered at the commencement of a proceeding in the absence of express statutory authority to award costs regardless of the outcome of the proceeding (p. 283) (this case was eventually overturned by this Court in 1999 CanLII 653 (SCC),  3 S.C.R. 46, but the interim costs issue was a secondary one that was not dealt with on appeal). As I stated above, the power to order costs contrary to the cause is always implicit in the court’s discretionary jurisdiction as to costs, as is the power to order interim costs.