Dechant v. Law Society of Alberta, 2001 ABCA 81

IN THE MATTER OF THE Legal Profession Act, S.A. 1990, c. L-9.1,

sections 51, 52, 53, 54, 55, 56, 58, 59, 61, 62

and the Regulations and Code of Professional Conduct thereto.

IN THE MATTER OF Complaints filed by Jeanette Dechant

with the Law Society of Alberta.

IN THE MATTER OF Complaints filed with the Law Society of Alberta

against Jeanette Dechant.

IN THE MATTER OF A Hearing regarding the Conduct of Jeanette Dechant.

Between Jeanette Dechant, Appellant/Applicant, and The Law Society of Alberta, Respondent/Respondent

Between Jeanette Dechant, Appellant/Applicant, and Ronald G. Stevens, The Law Society of Alberta, Neil Wittmann, Barbara Romaine, Alan MacLeod, Philip Lister, Lindsay MacDonald, David C. Maxwell, Peter Freeman, James McLeod and David Guenter, Defendants/Respondents

And between Neil Wittmann, The Law Society of Alberta, Barbara Romaine, Alan MacLeod, Philip Lister, Lindsay MacDonald, David C. Maxwell, Peter Freeman, James McLeod and David Guenter, Cross-Appellants, and Jeanette Dechant, Cross-Respondent

Between Jeanette Dechant, Respondent (Plaintiff), and Ronald G. Stevens, Appellant (Defendant), and Neil Wittmann, The Law Society of Alberta, Barbara Romaine, Alan MacLeod, Philip Lister, Lindsay MacDonald, David C. Maxwell, Peter Freeman, James McLeod and David Guenter, (Defendants)

Alberta Court of Appeal Madam Justice Conrad, Madam Justice McFadyen, Madam Justice Bensler

March 26, 2001

MEMORANDUM OF JUDGMENT AS TO COSTS

JEANETTE DECHANT

On her own behalf

Appeal No. 99-18047

A.W. MacDONALD Jr., Q.C. and

S.J. BURRELL

For The Law Society of Alberta

Appeal No. 99-18606

K.L. MOHOLITNY

For Ronald G. Stevens

G.F. SCOTT, Q.C.

For The Law Society of Alberta

THE COURT:

Ms. Dechant appeals, in part, a ruling of the Chambers Judge awarding costs solely for disbursements made in relation to the withdrawal of the Law Society's application to strike. She also applies for costs of the appeals in Action No. 98-18047 (the "266 appeal") and the appeal and cross appeal in Action Nos. 99-18594 and 99-18606 (the "privilege appeals"). Dechant suggests that the restriction of costs awardable to lay litigants to disbursements is no longer tenable given recent developments in the Canadian law of costs. Further, she says that any interpretation of r. 600 or r. 601 of the Alberta Rules of Court which excludes lay litigants from the definition of "party" is discriminatory and in breach of s. 15 of the Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act, 1982 (U.K.), 1982, c. 11 ["the Charter"].

The unsuccessful parties on appeal (referred to throughout as the defendants) concede that Ms. Dechant is entitled to some costs to compensate for lost opportunities, but they argue that Column 5 is not appropriate for an unrepresented litigant. Rather, they say that the matter is simply one of discretion. See: Huet v. Lynch, [2001] A.J. 145 (C.A.).

Thus, questions of entitlement and quantification arise. Ms. Dechant seeks full costs under Column 5 with respect to both the appeals and the court below, arguing that it is discriminatory and against Charter values for courts to discriminate between unrepresented and represented litigants when awarding costs. She relies on Skidmore v. Blackmore, [1995] 4 W.W.R. 524 (B.C.C.A.) where the court concluded that the removal of the distinction between self-represented litigants and lawyer-represented litigants is consonant with principles underlying the Charter. In short, Ms. Dechant submits that the costs schedule under the Rules applies to all parties and that any deviation from that schedule requires justification. Otherwise, discrimination results from costs awarded solely for actual disbursements or expenditures. Alternatively, she seeks a discretionary award of $30,000.

In her submissions, Ms. Dechant also seeks to distinguish Huet. Alternatively, she argues that Huet is not in line with the decisions of other courts in Canada and of the Court of Queen's Bench of Alberta, and she seeks a reconsideration of Huet. No formal application, however, was filed. In any event, we would not be prepared to reconsider Huet.

Decision

Rule 600 defines costs as follows:

600(1) In Rules 601 to 612

(a) "costs" includes all the reasonable and proper expenses which any party has paid or become liable to pay for the purpose of carrying on or appearing as party to any proceeding, including, without restricting the generality of the foregoing,

(i) the charges of barristers and solicitors,

(ii) the charges of accountants, engineers, medical practitioners or other experts for attendance to give evidence and, if the court so directs, the charges made by such persons for investigations and inquiries or assisting in the conduct of the trial,

(iii) the charges of legal agents,

(iv) expenses for the preparation of plans, models, or copies of documents,

(v) the fees payable to officers of the court, and

(vi) witness fees or conduct money for witnesses, together with the expenses of obtaining the attendances of witnesses at trial, and upon any examination;

Section 601(1) then sets out the principles governing costs awards and notes the various matters that the court may consider. Section 601(2) then allows the court to fix costs as follows:

(2) In awarding costs, the Court may

(a) fix all or part of the costs with or without reference to Schedule C;

(b) award or refuse costs in respect of a particular issue or part of a proceeding;

(d) award all or part of the costs

(i) to be taxed as a multiple or a proportion of any column of Schedule C, or

(ii) on a solicitor and client basis, or as a proportion of those costs;

(e) award a gross lump sum instead of, or in addition to, any taxed costs;

(f) award costs to one or more parties on one scale, and to another party or other parties on the same or another scale;

(g) direct whether or not any costs are to be set off.

Accordingly, no party enjoys an absolute entitlement to Schedule C costs. Costs are always discretionary based on the matters set out in r. 601(1). While there is a tendency to automatically order Schedule C costs, these costs are not and should not be treated as automatic.

In Huet, this court dealt with the issue of costs for the unrepresented litigant and held that costs were always discretionary and available for the unrepresented litigant on a discretionary basis. Thus, r. 600 was not interpreted as absolutely barring an award of costs to an unrepresented litigant over and above disbursements.

The various principles underlying costs set out in r. 601(1) also support Ms. Dechant's argument that indemnity is not the only rationale for a costs order. An ability to award costs serves many objectives. Costs provide partial indemnity for legal fees incurred, encourage settlement, and discourage frivolous actions as well as improper and unnecessary steps in litigation. See: Huet.

Nonetheless, indemnity for expenses paid has historically formed the basis of an order for costs. In The Law of Costs, looseleaf (Canada Law Book: Aurora, 1998) 2-1, Mark Orkin cites the case of Smith v. Butler (1875), L.R. 19 Eq. 473 at 475 for a nineteenth-century definition of party-and-party costs which is still widely utilized by modern Canadian courts:

...all that are necessary to enable the adverse party to conduct the litigation, and no more. Any charges merely for conducting litigation more conveniently may be called luxuries, and must be paid by the party incurring them.

Orkin justifies the continued use of this historic principle by suggesting that indemnity continues to be the "essence" of party-and-party costs and that it should be the guiding principle in the use of judicial discretion to award such costs. According to the principle of indemnity, Dechant could not claim party-and-party costs because she suffered no expense in hiring a lawyer to litigate her claims - and she cannot, therefore, be indemnified for it.

Rule 600 includes the fees of barristers and solicitors in its definition of costs. But even then, the courts have always been reluctant to order solicitor-client fees absent exceptional circumstances. Generally, a costs award beyond disbursements is only a partial indemnity of fees and should never, under any circumstances, exceed solicitor-client fees. In short, the possibility of a profit over and above expenses should not be an incentive to litigation or needless steps in litigation. Costs should always bear a relationship to the result, the amounts involved, the importance of the issues, the efficiency with which the litigation was conducted, and the other matters set out in r. 601.

In short, there should always be a relationship between the costs and the cause. The high costs of Schedule C will often make that schedule inappropriate. Thus, we reject Ms. Dechant's claims of entitlement to Schedule C costs and reiterate that Schedule C is not an automatic entitlement and that costs are always discretionary.

While indemnification is the traditional approach, several courts in this and other jurisdictions have adopted a more flexible attitude toward the awarding of costs to self-represented litigants. See: Shillingford v. Dalbridge Group Inc. (2000), 268 A.R. 324 (Q.B.); Skidmore v. Blackmore, supra. Before 1995, few courts awarded costs that exceeded mere disbursements to self-represented litigants, and many judges held that a lay party with no lawyer could only recover costs reflected in disbursements. See: Kendall and Dolphin Ventures Ltd. v. Hunt (#2) (1979), 16 B.C.L.R. 295 (C.A.). In Skidmore, however, Cumming J.A. (for the Court) rejected the historic "indemnity" approach to costs due to changes in the structure of the Supreme Court Rules and basic changes in the law of costs in British Columbia (at 538):

There are good reasons for allowing self-represented lay litigants to receive the benefit of recent developments in the law of costs. There is no logical reason for allowing a self-represented solicitor to claim costs under App. B of the Supreme Court Rules, while denying the same to a self-represented lay litigant. Because party and party costs are based on a tariff in this province, there is no danger of overcompensating self-represented lay litigants, and it would not be difficult to assess the costs to be paid.

As noted, Schedule C costs are not an automatic entitlement. We do accept that in addition to the underlying objective of partial indemnity, costs are also intended to promote settlement and deter frivolous actions. The threat of costs is always an important factor in the settlement process and without this "hammer," there is less of a disincentive to litigate.

The balancing of the various policy objectives associated with costs for the unrepresented litigant presents courts with a difficult challenge. Inequity can result from a strict indemnity approach where only one party faces a threat of costs. As noted, however, costs can always be awarded at the end of the day and the threat of costs exists for all. Moreover, anticipated legal fees for the represented litigant provide their own incentive to settle - one which the unrepresented litigant does not face. In fact, policy concerns arise where unrepresented litigants receive costs on other than an indemnity basis. For example, the expectation of costs may encourage litigation and discourage settlement because of an anticipated windfall to the unrepresented litigant that could result from a costs award. Certainly costs under Schedule C are substantial. Awarding costs to an unrepresented party in excess of expenses creates serious dangers in that regard. Similarly, those dangers have always been a good reason for keeping party-and-party costs well below the solicitor-client level except in exceptional circumstances. The ability to award partial Schedule C costs makes it clear that not all cases are entitled to the full schedule and, having regard to the schedule, we imagine that there are few cases that would attract a double Schedule C award.

It is true that unrepresented litigants expend time and effort presenting their law suits. Represented litigants, however, also sacrifice a considerable amount of their own time and effort for which no compensation is paid. Any award of costs is merely a partial reimbursement for their lawyer's fees. As noted, an award of costs to represented litigants should never be higher than their solicitor-client fees, which are only awarded in exceptional circumstances. Thus, applying an identical costs schedule to both represented and unrepresented litigants will work an inequity against the represented litigant who, even with an award of costs, will be left with some legal fees to pay and no compensation for a personal investment of time. What the Rules do provide is that both kinds of litigants are to be paid for their out-of-pocket expenses.

While the Rules provide that both represented and unrepresented litigants are to be compensated for out-of-pocket expenses, these parties cannot be treated exactly the same, because they are not in the same circumstance. On the one hand, represented parties are generally left with out-of-pocket expenses for legal fees over and above the costs awarded. In addition, represented parties have lost opportunity for time personally expended on their own suit (e.g., time consulting with lawyers, attendance in court, etc.), costs which are not compensated. Applying an identical costs schedule to the unrepresented litigants, who have no out-of-pocket expenses for the legal fee portion of the suit, effectively awards fees for their own time and work. In short, self-litigation could become an occupation.

As this court noted in Huet, it is difficult to determine the costs payable to unrepresented litigants in relation to Schedule C. The preferable approach is to view the matter of costs as discretionary. The court should seek an equitable result between the parties while balancing the various policy objectives of costs. Thus, we reject the idea that Schedule C is the automatic rule and that it simply represents a value for work to which all successful litigants are entitled.

That balancing of equities involved in crafting a just costs award is a delicate exercise. When determining an appropriate costs award for a successful unrepresented litigant, courts should consider many factors, including the lost opportunities of the litigant as a result of self-representation. For the sake of expediency, proof of the exact value of that lost opportunity is not required (or we would be into trials about costs). Nonetheless, whether a person has lost time from work to represent themselves is a relevant factor to consider. If an unrepresented litigant was not otherwise employed, the fee portion of costs attributable to lost opportunity may not exist or, at a minimum, would be significantly less than a person who has suffered a loss of income due to employment absences.

We reject the argument that Schedule C is an assessment of what particular work is worth and thus should apply regardless of whether any cost was in fact incurred. In our view, costs under the Rules are still primarily concerned with reimbursement for costs expended and a partial indemnification for legal fees, having regard to value for work. We recognize, however, that costs may include lost opportunity costs of the unrepresented litigant. That said, unrepresented and represented litigants are not in the same position. Schedule C does not provide an automatic basis for determining costs for unrepresented litigants and may also frequently not be appropriate for represented litigants.

When awarding costs above disbursements for the unrepresented litigant, the court must look at the particular facts of each case. Was the matter complicated? Was the work performed of good quality? Did the self-representation result in unnecessary delays? Did the litigant take up an unreasonable amount of time of opposing parties or the courts? Did the litigant lose time from work? In general terms, what is the lost opportunity of the unrepresented litigants? What would they have earned if not required to prepare their own case? Did the other side take advantage of the fact that they were facing unrepresented litigants by taking frivolous and unnecessary steps to thwart that litigant? Did the other side refuse to entertain reasonable requests to discuss settlement? What is an appropriate amount for the issues involved? All of the factors set out in r. 601(1) which are relevant in a particular case should be considered when selecting the appropriate costs award.

Ms. Dechant argues that a lawyer representing herself should be awarded costs on the same basis as a represented party because a lawyer brings the same level of skill to the job. She relies on several cases where lawyers acting on their own behalf were awarded full costs. See: Jaffe v. Dearing (1992), 7 C.P.C. (3d) 225 (Ont. Gen.Div.); Re Wright & McTaggart (1990), 75 O.R. (2d) 394 (Gen.Div.); Fellowes, McNeil v. Kansa General International Insurance Ltd. (1997), 37 O.R. (3d) 464 (Gen.Div.). With respect, we do not agree. The award is not an award for value of the work. Moreover, where a lawyer is not working as a lawyer, he or she should not be compensated for a lost opportunity which does not in fact exist. Rather, such a lawyer should be treated as any other lay litigant. This type of litigant should be compensated for lost opportunity only and that opportunity should bear some relationship to reality.

The case of an unrepresented litigant who is also a lawyer is particularly germane in this case because Ms. Dechant is a non-practising lawyer. She attributes her inactivity, in part, to the inappropriate appeal by the Law Society in her judicial review application of her disbarment, which has delayed her reinstatement. We reject that argument. It relies, at least in part, on the supposition that Ms. Dechant will be successful in the law suit. It is more appropriate to compensate any damages that flow from her restriction from practice at trial, rather than during a costs motion on an interim application.

Finally, there is the question of disbursements. The only specific disbursement addressed was that of photocopying. Ms. Dechant asks for an award of 25 cents per page for photocopying rather than the 15 cent award made in Huet. In our view, she is entitled to all reasonable disbursements, and copying is a legitimate disbursement. If she can prove that she has paid 25 cents a page to some arm's length person, the fee should be allowed. Otherwise we order 15 cents a page.

Photocopying is a difficult disbursement to address. Evidence in a given case may show that there should be no charge for photocopies for the represented litigant because the cost associated with copying is just part of the overhead of the firm which is compensated by a general costs order. Alternatively, there may be evidence in a given case as to the actual costs incurred as a result of farming out the expense to a third party. It may even be that a general costs award should be higher for the unrepresented litigant who does not receive a costs award over and above disbursements.

Application

Turning to the facts of this case, we are of the view that there should be an award of costs over and above the disbursement awards for the appeal in the privilege action. The appeal lasted 2 & � days plus time spent speaking to costs. Counsel for the defendants concede that it is an appropriate case for an award for lost opportunity. They note that there was some reference to Ms. Dechant's working for $100 a day at one time and suggest a fee in the range of $1,000 or slightly more. Ms. Dechant says that her earnings are irrelevant. Even if relevant, she was capable of earning at least $50 an hour briefing, but had to devote her time to the law suit. She seeks Schedule C, Column 5 costs or, alternatively, an award of $30,000.

This appeal plus submissions on costs (which involved oral submissions and written briefs) relate to very complicated issues. Ms. Dechant did a thorough job of addressing the issues, which reflects the considerable time she obviously spent in respect of this matter. We are of the view that it is appropriate to make an award beyond that of disbursements to account for lost opportunity. This was an interlocutory matter and the Law Society appealed and was unsuccessful. Moreover, while the pleadings do not prove or establish malice and it is only assumed because of the Rules, the Law Society saw fit to proceed only with a striking motion at the time rather than an application for summary judgment on the issue of malice. It lost, it appealed and lost again. There should be an award of costs for this extra step. In our view, however, $30,000 is completely out of the range for appropriate costs in this appeal, even if Ms. Dechant had been represented.

Considering the lost opportunity and the disincentive to litigation which costs appropriately promote, we set the costs at $2,500 for the appeal in the privilege action together with all reasonable disbursements. We are not prepared to order costs beyond disbursements in the court below. As the Chambers Judge was of the view that he was restricted in the costs that could be awarded to Ms. Dechant, we leave it open for her to address costs associated with that application at the end of the day in the event she is successful in the main action.

In summary, there will be one set of costs in the sum of $2,500, plus reasonable disbursements, payable jointly and severally by the parties in the privilege action, costs to be paid forthwith. The defendants have not satisfied us that there is any reason to defer payment.

Regarding disbursements, Ms. Dechant is entitled to all reasonable disbursements. If she has paid 25 cents per page for the photocopying, she should be allowed that expense. If not, we are satisfied that 15 cents per page is an appropriate figure.

With respect to the 266 appeal, we are cognizant of Ms. Dechant's argument regarding the withdrawal of Mr. McDonald as counsel. Nonetheless, in view of mixed success, we direct that the parties bear their own costs.

CONRAD J.A.

McFADYEN J.A.

BENSLER J.