More costs uncertainty

A recent post commented on the dichotomy in the approaches followed by Ontario courts in fixing costs. Some use an objective approach (in which the Rules Committee’s “Information for the Profession” is the starting point and the actual hourly rate has little or no relevance) while others use a subjective approach (usually starting with 60% of the actual hourly rate charged to the client). Typically, the “Information for the Profession” table is not referred to at all in the second approach.

Justice Douglas Belch’s December 22 costs ruling in 2145850 Ontario Limited v. Student Transportation, 2014 ONSC 7401 (CanLII) is a recent example of the “subjective” theory, in which actual hourly rates are of primary importance. Justice Belch set out his approach as follows:

From the costs submissions, the court has compiled information about the counsel involved including the year of their call to the bar, the number of hours each expended, their hourly rates and in the case of the Plaintiffs and STEO [the defendant], determined their hourly rates for partial indemnity equate to 60% of their actual rates consistent with past court decisions.

The plaintiffs’ lawyers were called to the bar in 1992, 2006 and 2011 respectively. The partial indemnity rates used were $495, $325 and $245. The first of these is higher than the highest rate, for the most senior of lawyers ($350), set out in the “Information for the Profession”. The rate of $495 is 60% of an actual rate of $825.

By contrast, the defendant’s lawyers were called in 1977, 2006 and 2009 and all had a partial indemnity hourly rate of $252. So, in this case, we have two lawyers with the same year of call (2006) using rates that varied by $73. And the senior lawyer for the plaintiff, who was 15 years junior to the senior lawyer for the plaintiffs, had a partial indemnity rate almost twice as high (and well in excess of the maximum in the “Information for the Profession”).

The total of the fees of the plaintiffs’ lawyers was $159,761 (there appears to have been an arithmetical error of about $5,000 in computing the fees of the junior lawyer for the plaintiffs, whose fees are shown as $58,809 but actually work out to $53,802). Still, had the maximum fees from the “Information for the Profession” been applied, the total would have been $123,339, $36,422 less than the total of the fees as computed based on actual hourly rates.

Justice Belch reduced the plaintiffs’ costs from the amount claimed but of course, the reduction was from a figure that was quite a bit higher than it would have been, had the “Information For the Profession” maximums been used.

In addition to the subjective-objective problem, this litigation was taking place in Perth. I doubt that any lawyers are charging $825 per hour there. While some courts have refused to allow Toronto hourly rates in centres where the standard rates are much lower (see, for example, my recent post about the decision of Justice Quinn in Huber v. Way), this issue does not appear to been argued before Justice Belch.

The Superior Court (or the Rules Committee) needs to figure this out. The approach used by Justice Belch in this case is completely at odds with that used recently by Justice Price in TMS Lighting Ltd. v. KJS Transport Inc., where actual hourly rates were said to be “irrelevant”.  But that is not to say that either judge is an outlier; both approaches have their adherents.

A more standardized approach to fixing costs would be desirable. It is clear that judges often decide costs without realizing that some of their colleagues are applying completely different principles, resulting in unpredictable and inconsistent outcomes.

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