Civil Litigation - Costs - Pro Bono Representation. 1465778 Ontario Inc. v. 1122077 Ontario Ltd.
In 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (Ont CA, 2006) the Court of Appeal commented extensively on the awarding of costs to pro bono counsel:
 As part of the recognition that costs serve a purpose beyond indemnification, the courts began to award costs in favour of litigants who were traditionally viewed as disentitled to costs. For example, costs have been awarded in cases where the litigant was self-represented (Skidmore v. Blackmore, 1995 CanLII 1537 (BC CA),  B.C.J. No. 305, 2 B.C.L.R. (3d) 201 (C.A.) and Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330,  O.J. No. 4600 (C.A.)); where the winning party was a law firm represented by one of its partners who was not charging fees (Fellowes, McNeil, supra); where counsel was salaried (Solicitors Act, R.S.O. 1990, c. S.15, s. 36); and where the responsibility for a party's legal fees was undertaken by a third party (Lavigne v. Ontario Public Service Employees Union (No. 2) (1987), 1987 CanLII 4184 (ON SC), 60 O.R. (2d) 486,  O.J. No. 653 (H.C.J.)).
 Costs have also been awarded to counsel acting pro bono in Charter or public interest cases such as Rogers v. Greater Sudbury (City) Administrator, Ontario Works (2001), 2001 CanLII 28087 (ON SC), 57 O.R. (3d) 467,  O.J. No. 3346 (S.C.J.). In that case, Epstein J. awarded costs payable forthwith on an injunction application. She stated at para. 21: [page766]
Through granting, when appropriate, cost awards payable forthwith during the course of what is frequently protracted litigation, the financial burden assumed by the lawyers doing pro bono work is reduced. Orders of this nature would allow more lawyers to accept this kind of retainer thereby increasing the opportunity for people, such as Ms. Rogers, to have access to justice. As well, applicants who may suffer irreparable harm as a result of the application of a law that is the subject of a legitimate Charter challenge have increased opportunity to seek interlocutory relief since counsel acting for them have a chance of being paid promptly for the often very expensive process of preparing for and arguing a motion for an interlocutory injunction. There have also been some recent instances, both in Ontario and in British Columbia, where costs orders have been made in favour of pro bono counsel in non-public interest cases. See for example, MacKay Homes v. North Bay (City),  O.J. No. 3263, 141 A.C.W.S. (3d) 376 (S.C.J.); Spatone v. Banks,  O.J. No. 4647, 118 A.C.W.S. (3d) 335 (S.C.J.); and Jacks v. Victoria Amateur Swimming Club, 2005 BCSC 1378 (CanLII),  B.C.J. No. 2086, 143 A.C.W.S. (3d) 47 (S.C.) In Brockie v. Ontario (Human Rights Commission), 2004 CanLII 16323 (ON CA),  O.J. No. 1285, 185 O.A.C. 366 (C.A.), this court reversed a decision of the Divisional Court that denied costs to pro bono counsel, holding that "[s]uch a policy would act as a severe penalty to lawyers acting in the public interest by making it possible for litigants of modest means to access the courts" [at para. 6].
 Finally, rule 57.01 of the Rules of Civil Procedure sets out the factors a court may consider when deciding on a costs award. It provides:
57.01(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, All the amici agree that these factors, which reflect the four principles referred to in Fellowes and in Fong v. Chan of indemnity, encouragement of settlements, discouragement of frivolous actions and defences, and discouragement of unnecessary steps in the litigation, can be applied in pro bono cases. PBLO submits that access to justice should be added as a fifth purpose.
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution; [page767]
(g) a party's denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different solicitor; and
(i) any other matter relevant to the question of costs.
(2) The fact that a party is successful in a proceeding or a step in a proceeding does not prevent the court from awarding costs against the party in a proper case.
 In its brief, the Advocates' Society submits that costs should be available to pro bono parties based on the factors set out in rule 57.01(1) as well as on the principles of access to justice and the efficient administration of the courts. However, it argues that while the court should encourage access to justice through pro bono litigation, it should be mindful of considerations that may uniquely arise in such cases. It is important that there always be the potential for costs consequences to ensure that both parties adopt appropriate litigation strategies. However, an award of costs in favour of a successful pro bono party will not always be appropriate. For example, an award might not be made in a case where there was never an expectation that the pro bono party would be able to pay costs if unsuccessful.
Issue 1: Can pro bono counsel seek costs?
 It is clear from the submissions of the amici representing the views of the profession, as well as from the developing case law in this area, and I agree, that in the current costs regime, there should be no prohibition on an award of costs in favour of pro bono counsel in appropriate cases. Although the original concept of acting on a pro bono basis meant that the lawyer was volunteering his or her time with no expectation of any reimbursement, the law now recognizes that costs awards may serve purposes other than [page768] indemnity. To be clear, it is neither inappropriate, nor does it derogate from the charitable purpose of volunteerism, for counsel who have agreed to act pro bono to receive some reimbursement for their services from the losing party in the litigation.
 To the contrary, allowing pro bono parties to be subject to the ordinary costs consequences that apply to other parties has two positive consequences: (1) it ensures that both the non-pro bono party and the pro bono party know that they are not free to abuse the system without fear of the sanction of an award of costs; and (2) it promotes access to justice by enabling and encouraging more lawyers to volunteer to work pro bono in deserving cases. Because the potential merit of the case will already factor into whether a lawyer agrees to act pro bono, there is no anticipation that the potential for costs awards will cause lawyers to agree to act only in cases where they anticipate a costs award.
Issue 2: Does the costs award belong to pro bono counsel or to the litigant?
 Where costs are awarded in favour of a party, the costs belong to that party. See Mark M. Orkin, Q.C., The Law of Costs, looseleaf (Aurora: Canada Law Book, 2005) at 204 and Rules of Civil Procedure, rule 59.03(6). However, pro bono counsel may make fee arrangements with their clients that allow the costs to be paid to the lawyer. This ensures that there will be no windfall to the client who is not paying for legal services.
Issue 3: Is it fair to award costs in favour of a pro bono party if that party would be unable to pay costs ordered against it?
 The case law makes it clear -- and the submissions of the amici support the proposition -- that although it is open to a judge to award costs to a successful pro bono party, such an award is not mandatory and will depend on the rule 57.01 factors, considerations of access to justice and the need to maintain a level playing field between the parties.
 This is particularly true with respect to interlocutory costs awards that are ordered to be paid forthwith. If a pro bono party has unsatisfied costs orders outstanding, there may well be potential unfairness in obliging a non-pro bono party who is unsuccessful on an interlocutory motion to pay costs of a motion forthwith without offset.
 The effectiveness of the system relies on the fact that all parties are at risk to pay costs if they are unwilling to consider a reasonable settlement, or if they unnecessarily bring or oppose [page769] motions. In its recently released decision in Walker v. Ritchie,  S.C.J. No. 45, 2006 SCC 45, denying a risk premium to plaintiff's counsel as part of the losing defendant's costs obligation, the Supreme Court of Canada affirmed the concept that all defendants must face the same risk of costs (at para. 28):
Unsuccessful defendants should expect to pay similar amounts by way of costs across similar pieces of litigation involving similar conduct and counsel, regardless of what arrangements the particular plaintiff may have concluded with counsel. The same proposition applies to unsuccessful plaintiffs. However, if the pro bono party is effectively immune from any real obligation to pay interlocutory costs because of impecuniosity, then the purpose of the costs rule is undermined.
 The issue of the costs obligations of impecunious parties represented by pro bono counsel presents a delicate problem from the point of view of the profession, as its members not only have a collective obligation to provide services pro bono in appropriate cases, but they also, of course, act for clients who may be litigating against a pro bono party. In that context, the amici have been careful to encourage the court to maintain flexibility and to develop the principles on a case-by-case basis. I agree with that approach. As Mr. Dallal, counsel for the respondent, points out, the situation may become somewhat anomalous if the pro bono party has nothing at stake regarding the costs and the real adversaries on that issue are the non-pro bono party and the pro bono lawyer.
 The concern for levelling the playing field for pro bono and non-pro bono litigants does not require, however, that the parties be placed in equal positions in every case. As the approaches adopted in some foreign jurisdictions illustrate, the policy objective of facilitating access to justice may be of sufficient importance to warrant placing the pro bono litigant in a more favourable position in some cases. For example, although s. 18 of the English Legal Aid Act 1988 (U.K.), 1988, c. 34 permits courts to make a costs award in favour of successful litigants represented by Legal Aid, these litigants are normally not required to pay costs when unsuccessful. See John Peysner, "A Revolution By Degrees: From Costs to Financing and the End of the Indemnity Principle"  1 Web JCLI. Similarly, in Australia the rules of the Federal Magistrates and New South Wales courts permit litigants represented by pro bono counsel to seek costs awards. See Federal Magistrates Court Rules 2001 (Cth.), rule 12.07(3) and Supreme Court Rules 1970 (N.S.W.), rule 66A.9. Although there is no comparable statutory context in Ontario, these provisions support the principle that litigants represented by pro bono counsel should not be denied access to the costs regime. [page770]
 There are provisions in the rules that can be used to level the playing field when costs are awarded to a pro bono party. For example, rule 57.03(2) allows the court to dismiss a party's proceeding, strike the party's defence or "make such other order as is just" where that party fails to pay the costs of a motion as ordered. Rule 57.01(4)(b) allows the court to award only a percentage of assessed costs. These two rules can be used by the court to reduce an award of costs to a pro bono party who wins an interlocutory motion, where that party has failed to pay costs previously ordered against it.
 The correct approach, then, is for the judge in each case to be apprised of the status of outstanding costs orders, and then weigh the access to justice issues together with the particular circumstances of the interlocutory matter, including the conduct of the parties and the relative importance of the motion within the context of the litigation. The judge will have the discretion to make the order that fits the circumstances, including ordering costs payable to the pro bono party, reducing the quantum of those costs or limiting the order to disbursements, making the costs payable only at the end of the case, or making no order.
Issue 4: Should the court develop a set of rules governing the availability of costs awards in favour of pro bono parties?
 I agree with the submission of PBLO that the list of the purposes of costs awards should now include access to justice as a fifth consideration. It is clear that the profession sees the availability of costs orders in favour of pro bono counsel as a tool to potentially reduce the necessary financial sacrifice associated with taking on pro bono work and to thereby increase the number of counsel who may be willing and able to accept pro bono cases. This will facilitate access to justice.
 Because of the discretion accorded to judges to award and fix the quantum of costs (subject to s. 131 of the Courts of Justice Act, the Rules of Civil Procedure and the Supreme Court's decision in Walker), they have the necessary scope to respond to any potential unfairness that may arise as a result of the parties' unequal abilities to pay costs, and the fact that the pro bono party is not paying a lawyer. They also have the flexibility to craft a costs order that addresses the potential unfairness where the circumstances, including all the other relevant factors, call for it.
 Where a case is brought to assert a Charter claim or other matter of general public importance, different considerations may apply when deciding whether to award costs in favour of the pro bono party. In those cases, for example, it may be appropriate [page771] for the court to consider potentially insulating the pro bono party from exposure to costs, or limiting the party's exposure, in order to facilitate the resolution of an important public interest issue by the court. The principles that will be applied in this type of litigation will also develop as the cases arise.
 The legal profession in Ontario has a history of commitment to ensuring access to justice and providing pro bono services through its members. That history is reflected in today's litigation environment where it is both appropriate and necessary that costs awards be available to successful pro bono litigants in ordinary private law cases both at the end of the case and on interlocutory motions. The principles that will guide the exercise of the court's discretion in deciding when such costs will be awarded should be developed over time on a case-by-case basis.