Divisional Court Upholds “Massive” Costs Award of $160,000 for One-day Motion

In Jazz Air LP v. Toronto Port Authority, the Divisional Court split 2-1 on whether to uphold a costs award of $160,000 made by Justice James Spence following a failed injunction motion. Justices Dennis Lane and Gladys Pardu supported the award while dissenting Justice Ted Matlow would have reduced it to $80,000 or less. The decision, particularly the reasons of Justice Matlow, contains some interesting observations about costs.

The dispute involved the Toronto Island Airport. Jazz Air’s lease of premises on the Island was terminated in January, 2006 and Porter Airlines planned to begin operations in its place. Porter was to start construction of its facilities on March 1, 2006.

On Thursday, February 23, 2006 (at 6:21 p.m.), Jazz served notice of a motion for an interlocutory injunction, returnable the following Monday, Feburary 27, 2006. (This was one day before the termination of the Jazz lease was to take effect.) The motion sought to restrain termination of the Jazz lease.

Spence J. reviewed the material over the weekend and following the hearing of the motion on February 27, 2006, in eight paragraphs of reasons, he dismissed the motion. The Divisional Court said he found it “entirely without merit” (although the actual reasons of Justice Spence were not quite so harsh).

The responding parties sought and received costs on a substantial indemnity scale. Jazz opposed such an award but refused to provide Justice Spence with information about the amount of its own legal bill.

Justice Spence’s costs decision was only six sentences long and contained very little information. Apparently, the respondents’ lawyers had actually billed their clients $280,000 for the motion. Presumably, there were no cross-examinations, given the very short time between service of the motion and the hearing date, so it appears that all of the respondents’ legal fees related to preparation of responding material and argument of the motion.

The respondents sought substantial indemnity fees of $176,321.25, which was about 63% of the actual amount billed. They received an award of $160,000 (57% of actual fees). The reasons do not make clear how many lawyers were involved. Two counsel evidently represented all of the respondents on the appeal, but the reasons of the majority refer to “a flock of senior counsel” having appeared on the motion before Spence J.

The majority in the Divisional Court held that “[i]t was open to Spence J. to award costs on a substantial indemnity basis because of the unsubstantiated allegations of conspiracy and improper conduct and because of the tactical approach to the timing of the motion.”

Jazz was faulted by both Justice Spence and the majority in the Divisional Court for having failed to disclose its own lawyers’ dockets. Spence J. said:

Without the bill that the plaintiff’s counsel are submitting to the plaintiff for this matter, the comment that an attack of the kind they have made on quantum is “no more than an attack in the air” seems quite apt and no doubt could be put more bluntly.

Conceding that the costs award had been “enormous”, Justices Pardu and Lane nevertheless felt that Spence J. had not erred in principle in awarding $160,000 to the defendants, nor had he been plainly wrong to do so.

Dissenting Justice Ted Matlow strongly disagreed. He would have allowed not more than $80,000 for fees. In the course of his reasons, he inveighed against the current practice of fixing costs, sometimes in huge amounts, with minimal information before the court:

[2] The Rules of Civil Procedure now provide relatively few guidelines for judges to apply in the fixing of costs. Judges are generally left to apply a very broad discretion, especially with respect to quantum, based on the costs outlines which must now be filed by counsel. There are hardly any safeguards or restrictions still in place to prevent the making of costs awards that are excessive and there is no real evidence presented upon which most costs awards are based. In the case at bar, the motion judge was left to make his award on the basis of what he learned during his consideration of the motion before him and the bill of costs (not “costs outline”) and submissions filed.

[3] The amount that the motion judge awarded solely for fees, namely, $160,000 was a very large sum by any standard. Observers might well be forgiven for considering it odd that such a large sum could be awarded almost summarily and without formal evidence of any kind whereas judgments for even very small amounts of money can generally be granted only after evidence is considered by the court, usually after a trial or some other hearing. The process we now follow might even be seen by those observers to reflect a triumph of expedience over justice when it comes to costs.

Justice Matlow went on to say that “[a]lthough it is not impossible, it is difficult in my view to conceive of any one-day motion, including the various associated steps also required to be taken, that could ever justify an award of costs for fees at the level of the award made”.

Interestingly, Matlow J. felt that the motions judge had been wrong to take into account the refusal of Jazz to disclose information about its own legal fees. He said, “There is no logical reason why the appropriate quantum of the respondents’ costs should be related in any way to that bill or the underlying dockets.”


What lessons can be learned from this decision and applied to more garden-variety litigation?

First, it would seem that motions for injunctions, particularly ones brought on short notice, are more likely to attract awards of substantial indemnity costs.

It is not clear from the reasons of any of the five judges in this case (Justice Swinton granted leave to appeal to Divisional Court) why the costs award was $160,000 when the actual amount billed to the winning parties was almost twice that. Justice Spence said in his reasons that he was reducing the amount claimed from $176,321.25 to $160,000 because he doubted that “the top of the rate is appropriate for all of the lawyers for all of their work”. But the Rules do not prescribe any top rate for substantial indemnity costs. There is a table of maximum partial indemnity rates that is commonly used by judges fixing costs under Rule 57 and the Rules do say that “substantial indemnity” costs are 1.5 times partial indemnity, so perhaps that is what Justice Spence meant. However, awards of costs on a substantial indemnity scale are more commonly fixed at 90-100% of actual rates, not 57 percent.

Still, the reasons of all five judges shed no light on the principles that produced a substantial indemnity award of $160,000 when the actual fees were $280,000. It would have been helpful to have such guidance.

In our view, there is much merit in Justice Matlow’s cri de coeur about the current lack of guidelines for costs awards. From the standpoint of counsel, the fixing of costs is a lottery, with little consistency from one case to the next. These days, it is not unusual for the costs in a case to approach or even exceed the amount in issue between the parties, yet, as Justice Matlow observes, there are “hardly any safeguards or restrictions still in place to prevent the making of costs awards that are excessive and there is no real evidence presented upon which most costs awards are based.” 

As noted above, Justice Matlow disagreed with the majority (and with Spence J.) regarding the significance of Jazz’ refusal to produce its own time dockets. He did not believe that time legal fees incurred by the losing party was relevant to fixing costs of the successful party.

We would agree with that proposition if there were some objectively reasonable amount at which the costs of a one-day motion are fixed. But that is obviously not the case (even Matlow J.’s $80,000 figure is far greater than the amount that would be awarded for practically any other motion of that duration). Rather, costs are fixed having regard largely to the circumstances of the particular case before the court. Given that fact and that “reasonableness” is the touchstone used by the courts, what better evidence could there be than the fees incurred by the losing side?

All in all, this decision is another chapter in the “Wild West” that is the current Ontario law of costs.

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