Costs - Public Interest Litigation. Dominion of Canada General Insurance Company v. Ridi
In Dominion of Canada General Insurance Company v. Ridi (Ont CA, 2022) the Court of Appeal ordered no costs on a proceeding where the matter was in the public interest:
 This is a novel issue of public importance to those who have been catastrophically injured in a motor vehicle accident. There is therefore no order for costs of this appeal.. Bilodeau v. Ontario (Minister of Natural Resources)
In Bilodeau v. Ontario (Minister of Natural Resources) (Div Court, 2022) the Divisional Court considers the cost consequences of 'novelty' of the legal issues:
 On the issue of novelty, the guidance provided by Spence J. in Baldwin v Daubney, 2006 CanLII 33317 (ON SC), 21 B.L.R. (4th) 232, at para. 22, is instructive:. British Columbia (Minister of Forests) v. Okanagan Indian Band
If the unsuccessful party says that he or she should be relieved from the costs rule because a novel issue was raised, it is not clear why that should be a relevant reason unless that element of novelty goes to the reasonable expectations of the party about the litigation. If the issue is truly open … the litigant could reasonably say that he or she had no proper reason to expect to fail. But if all that the litigant can say is that there was no decided case directly on the point, that begs the question about reasonable expectations. The litigant in that situation is vulnerable to the response: although there are no decided cases directly on point, the law is clearly against your case, so you should reasonably expect to lose. On this basis, the test for a novel issue based on whether the issue is an open one serves the purpose that would seem fairly to be intended to be achieved by the exception for novel issues in respect of costs awards.
In British Columbia (Minister of Forests) v. Okanagan Indian Band (SCC, 2003) the Supreme Court of Canada, in a leading case, considered cost awards in public interest litigation and also public interest interim costs:
(3) Public Interest Litigation and Access to Justice. Know Your City Inc. v. The Corporation of the City of Brantford
27 Another consideration relevant to the application of costs rules is access to justice. This factor has increased in importance as litigation over matters of public interest has become more common, especially since the advent of the Charter. In special cases where individual litigants of limited means seek to enforce their constitutional rights, courts often exercise their discretion on costs so as to avoid the harshness that might result from adherence to the traditional principles. This helps to ensure that ordinary citizens have access to the justice system when they seek to resolve matters of consequence to the community as a whole.
28 Courts have referred to the importance of this objective on numerous occasions. In Canadian Newspapers Co. v. Attorney-General of Canada (1986), 1986 CanLII 2675 (ON SC), 32 D.L.R. (4th) 292 (Ont. H.C.J.), Osler J. opined that “it is desirable that bona fide challenge is not to be discouraged by the necessity for the applicant to bear the entire burden” (pp. 305-6), while at the same time cautioning that “the Crown should not be treated as an unlimited source of funds with the result that marginal applications would be encouraged” (p. 306). In Re Lavigne and Ontario Public Service Employees Union (No. 2) (1987), 1987 CanLII 4184 (ON SC), 60 O.R. (2d) 486 (H.C.J.), White J. held that “it is desirable that Charter litigation not be beyond the reach of the citizen of ordinary means” (p. 526). He awarded costs to the successful Charter applicant in spite of the fact that his representation had been paid for by a third-party organization (so that he would not, on the traditional approach, have been entitled to any indemnity). This case was overturned on the merits on appeal (Lavigne v. O.P.S.E.U. (1989), 1989 CanLII 4087 (ON CA), 67 O.R. (2d) 536 (C.A.), aff’d 1991 CanLII 68 (SCC),  2 S.C.R. 211), but neither the Ontario Court of Appeal nor this Court expressed any disapproval of White J.’s remarks on costs. Referring to both Canadian Newspapers and Lavigne in Rogers v. Sudbury (Administrator of Ontario Works) (2001), 2001 CanLII 28087 (ON SC), 57 O.R. (3d) 467 (S.C.J.), Epstein J. concluded at para. 19 that “costs can be used as an instrument of policy and . . . making Charter litigation accessible to ordinary citizens is recognized as a legitimate and important policy objective”.
29 In B. (R.) v. Children’s Aid Society of Metropolitan Toronto, 1995 CanLII 115 (SCC),  1 S.C.R. 315, the applicants, who were Jehovah’s Witnesses, unsuccessfully argued that their Charter rights had been violated when a blood transfusion was administered to their baby daughter over their objections. Instead of granting costs in the cause, the District Court judge directed the intervening Attorney General to pay the applicants’ costs. Whealy Dist. Ct. J. cited Osler J.’s statement in Canadian Newspapers, supra, that bona fide challenges should not be deterred, and observed that the case before him was an unusual one involving a matter of province-wide importance (see 1989 CanLII 7394 (MB CA),  O.J. No. 205 (QL) (Dist. Ct.)). His costs order, although unconventional, was upheld on appeal by the Ontario Court of Appeal, and subsequently by this Court. At the Court of Appeal, Tarnopolsky J.A. noted that this case, in which “the parents rose up against state power because of their religious beliefs”, was one of national, even international significance ((1992), 1992 CanLII 2831 (ON CA), 10 O.R. (3d) 321, at pp. 354-55). La Forest J. stated at para. 122 of this Court’s judgment that the costs award against the Attorney General was “highly unusual” and something that should be permitted “only in very rare cases”, but that the case “raised special and peculiar problems”. He allowed Whealy Dist. Ct. J.’s order to stand.
30 The B. (R.) case illustrates that in highly exceptional cases involving matters of public importance the individual litigant who loses on the merits may not only be relieved of the harsh consequence of paying the other side’s costs, but may actually have its own costs ordered to be paid by a successful intervenor or party. It should be noted that Whealy Dist. Ct. J. applied Rule 57.01(2), a provision of Ontario’s Rules of Civil Procedure that expressly authorized the court to award costs against a successful litigant and specified that the importance of the issues was a factor to be considered (see Rule 57.01(1)(d)). Although these principles are not spelled out in the Supreme Court of British Columbia Rules of Court, in my view they are generally relevant in guiding the exercise of a court’s discretion as to costs. They form part of the background against which a British Columbia court exercises its inherent equitable jurisdiction, confirmed by Rule 57(9), to depart from the usual rule that costs follow the event.
(5) Interim Costs in Public Interest Litigation
38 The present appeal raises the question of how the principles governing interim costs operate in combination with the special considerations that come into play in cases of public importance. In cases of this nature, as I have indicated above, the more usual purposes of costs awards are often superseded by other policy objectives, notably that of ensuring that ordinary citizens will have access to the courts to determine their constitutional rights and other issues of broad social significance. Furthermore, it is often inherent in the nature of cases of this kind that the issues to be determined are of significance not only to the parties but to the broader community, and as a result the public interest is served by a proper resolution of those issues. In both these respects, public law cases as a class can be distinguished from ordinary civil disputes. They may be viewed as a subcategory where the “special circumstances” that must be present to justify an award of interim costs are related to the public importance of the questions at issue in the case. It is for the trial court to determine in each instance whether a particular case, which might be classified as “special” by its very nature as a public interest case, is special enough to rise to the level where the unusual measure of ordering costs would be appropriate.
39 One factor to be borne in mind by the court in making this determination is that in a public law case costs will not always be awarded to the successful party if, for example, that party is the government and the opposing party is an individual Charter claimant of limited means. Indeed, as the B. (R.) case demonstrates, it is possible (although still unusual) for costs to be awarded in favour of the unsuccessful party if the court considers that this is necessary to ensure that ordinary citizens will not be deterred from bringing important constitutional arguments before the courts. Concerns about prejudging the issues are therefore attenuated in this context since costs, even if awarded at the end of the proceedings, will not necessarily reflect the outcome on the merits. Another factor to be considered is the extent to which the issues raised are of public importance, and the public interest in bringing those issues before a court.
40 With these considerations in mind, I would identify the criteria that must be present to justify an award of interim costs in this kind of case as follows:
1. The party seeking interim costs genuinely cannot afford to pay for the litigation, and no other realistic option exists for bringing the issues to trial — in short, the litigation would be unable to proceed if the order were not made.41 These are necessary conditions that must be met for an award of interim costs to be available in cases of this type. The fact that they are met in a particular case is not necessarily sufficient to establish that such an award should be made; that determination is in the discretion of the court. If all three conditions are established, courts have a narrow jurisdiction to order that the impecunious party’s costs be paid prospectively. Such orders should be carefully fashioned and reviewed over the course of the proceedings to ensure that concerns about access to justice are balanced against the need to encourage the reasonable and efficient conduct of litigation, which is also one of the purposes of costs awards. When making these decisions courts must also be mindful of the position of defendants. The award of interim costs must not impose an unfair burden on them. In the context of public interest litigation judges must be particularly sensitive to the position of private litigants who may, in some ways, be caught in the crossfire of disputes which, essentially, involve the relationship between the claimants and certain public authorities, or the effect of laws of general application. Within these parameters, it is a matter of the trial court’s discretion to determine whether the case is such that the interests of justice would be best served by making the order.
2. The claim to be adjudicated is prima facie meritorious; that is, the claim is at least of sufficient merit that it is contrary to the interests of justice for the opportunity to pursue the case to be forfeited just because the litigant lacks financial means.
3. The issues raised transcend the individual interests of the particular litigant, are of public importance, and have not been resolved in previous cases.
In Know Your City Inc. v. The Corporation of the City of Brantford (Div Ct, 2021) the Divisional Court considered public interest costs awards:
 KYC is the unsuccessful party. It seeks to avoid a payment of costs on the basis of a public interest exception. The public interest exception is an exception that the courts have used to exempt public interest litigants from an adverse costs award where the litigants have no direct pecuniary or other significant interest in the outcome of the litigation.. Stewart v. Toronto (Police Services Board)
 KYC submits that it falls into this category. It argues that the sale of the Arrowdale golf course was an important issue for the people of Brantford. The two directors of KYC have no pecuniary or other interest in the outcome of the litigation. Thus, KYC should be exempted from the payment of an adverse costs award.
 I accept that one of the bases for the evolution of the public interest exemption is the court’s recognition that there is an important public purpose that can be at stake when a member of the public commences a court action to ensure that politicians do not take advantage of their elected status to further their own interests. Politicians who do so should and must be held to account if our democratic process is to survive and flourish. For this reason, actions with this aim in mind should not be discouraged because of a fear of an adverse costs award.
 An example of a case where the Divisional Court declined to make an award of costs against an unsuccessful applicant on the basis of the public interest exemption is Magder v. Ford, 2013 ONSC 1842, 357 D.L.R. (4th) 191. In that case, the Court found that the applicant had been successful on one of the issues; that the issues raised were novel and important and had been clarified in the case; and, in the circumstances, it was reasonable for the applicant to pursue the application.
 The decision of Cooper et al v. Wiancko et al, 2018 ONSC 1654, 73 M.L.P.R. (5th) 235, contains a useful discussion of the principles and factors that govern the considerations involved in deciding whether a court should invoke the public interest exemption.
 In Cooper, supra, the Court weighed the following factors, discussed in the earlier case of St. James’ Preservation Society v. Toronto (City) (2006), 2006 CanLII 22806 (ON SC), 272 D.L.R. (4th) 149 (Ont. Sup. Ct.), rev’d on other grounds 2007 ONCA 601: (a) the nature of the unsuccessful litigant; (b) the nature of the successful litigant; (c) whether the litigation was in the public interest; (d) whether the litigation had an adverse effect on the public interest, and (e) the financial consequences to the parties.
In Stewart v. Toronto (Police Services Board) (Ont CA, 2020) the Court of Appeal considered the principles applicable to an award of substantial indemnity costs in the public interest:
 First, Mr. Stewart’s action does not satisfy the criteria for awarding special costs on a substantial indemnity basis in cases involving public interest litigants as set out by the Supreme Court of Canada in Carter v. Canada (Attorney General), 2015 SCC 5,  1 S.C.R. 331, at paras. 137-140.
 Carter requires a litigant to satisfy two criteria for an award of public interest litigation special costs, the first of which is to demonstrate that his proceeding involved matters of public interest that are “truly exceptional” and he has no personal, proprietary or pecuniary interest in the litigation that would justify the proceeding on economic grounds: at para. 140. Mr. Stewart does not satisfy this first criterion. He had an encounter with members of the TPS that he alleged resulted in the violation of several of his rights guaranteed under the Canadian Charter of Rights and Freedoms. Mr. Stewart brought a civil suit seeking a remedy for those violations.
But, as the Supreme Court observed in Carter at para. 137, “[a]lmost all constitutional litigation concerns ‘matters of public importance’”. While Mr. Stewart advanced important Charter claims, we do not regard the matters raised in his proceeding as “truly exceptional”, within the meaning of Carter.
 Also, Mr. Stewart has not demonstrated that he has “no personal, proprietary or pecuniary interest in the litigation that would justify the proceedings on economic grounds”: Carter, at para. 140. On the contrary, the pleadings and history of this action show that Mr. Stewart had a personal and pecuniary interest in the litigation.
He initiated the lawsuit in the Small Claims Court but then transferred it to the Superior Court of Justice. At trial, Mr. Stewart sought damages for the violation of his personal rights in the amount of $100,000 which, at the time, was the upper limit for a monetary claim in a simplified procedure action under the Rules. While Mr. Stewart reduced his request for damages during the appeal to $50,000, and then to $20,000, monetary damages as compensation for a wrong to his personal rights remained a key element of his claim. Accordingly, his action does not satisfy the Carter criteria for an award of substantial indemnity costs for public interest litigation.