Walker v Ritchie

With all the changes to Ontario’s cost rules throughout the past 10 years, the ruling in Walker v Ritchie, 2006 SCC 45, has less impact than most handed down by the Supreme Court of Canada (“SCC”). The case concerns the legitimacy of a trial judge awarding costs against a defendant to cover a “risk premium.”

Risk premiums were not uncommon prior to the changes allowing contingency fees. A plaintiff’s lawyer would work for free, on the grounds that if the plaintiff won the case, the lawyer would receive an amount over and above his or her normal. A risk premium functioned the same way that contingency fees operate today: it allowed impecunious plaintiffs to bring forward their claims. But despite the practice being mostly defunct, this decision still has important implications for statutory interpretation law and arguments based on access to justice.

Following a lengthy trial, during which the plaintiffs had offered to settle, the plaintiffs won the dispute. They were awarded damages exceeding their offer to settle. Under Rule 49.10 of the Rules of Civil Procedure, RRO 1990, Reg 194 [the Rules], they were awarded costs on the substantial indemnity scale, and the trial judge took into account all the factors enumerated under Rule 57.01(1). The case turns on the fact that he also awarded the plaintiffs their risk premium, under his 57.01(1)(i) power to consider “any other matter relevant to the question of costs.”

The unanimous SCC ruled that, despite the very broad wording of that section, the judge’s powers to award costs are constrained by the common characteristics shared by the enumerated factors (a) through (h). The SCC’s reasoning is that if the judge were permitted under the statute to make any apportionment at all, there would be no need for enumerated factors to guide his judgement. And since he therefore must have some constraint, the best way to do so is by looking to which characteristics all of the other subsections share.

The two shared characteristics of the enumerated factors are:

1. Neutrality. The factors all theoretically apply to the plaintiff and defendant equally. For example, both sides are equally able act vexatiously, or unnecessarily lengthen the proceedings. That cannot be said for an award of a risk premium, because, since it can only be claimed by plaintiffs, it therefore only applies to defendants.
2. Predictability. All of the factors are those which can be apprehended by both sides during the proceedings since they all concern either the nature of the case or the conduct of the parties. This also cannot be said for an award of a risk premium, because any such agreement, if it exists at all, is a private matter between the plaintiff and his lawyer. It would be unfair to the defence if they were to be deprived of this critical piece of information when weighing whether or not to settle.

The Rules are replete with subsections which, after an exhaustive list, leave all discretion to the trial judge or master. This case affirms that that discretion is more limited than it appears; it is constrained by whatever characteristics are shared within that list.

My only problem with this case is the SCC’s handling of the “access to justice” arguments. The plaintiffs argued that, notwithstanding that awards of risk premiums do not share the abovementioned characteristics, they should nevertheless be allowed because they increase access to justice. The Supreme Court, in response, ruled that access to justice ought not to be a mitigating factor when considering the defendant’s liability for the risk premium, because access to justice is already ensured by the allowance of a risk premium in the first place.

This argument does not hold water. Access to justice is not either ensured or absent; it is measured by a continuum. All meritorious claims always being entirely compensated would be the ideal, and only those with money being permitted to pursue redress would be the opposite. In between those extremes lie an infinite number of possibilities.

Here, the meritorious plaintiff was forced into paying the risk premium out of her damages, thus decreasing the compensation that she is entitled to, and thus decreasing the justice to which she has access. The Supreme Court should have recognized this, and not simply dismissed the access to justice considerations. Now, there were lots of mitigating factors, and I think that the SCC did a good job of explaining and applying those factors to this case. Their statutory interpretation follows long accepted principles. But that doesn’t warrant treating the concept of access to justice so summarily. They seem to do this in almost every case: spend lots of time and effort meticulously explaining most of the legal points raised and then just brush aside a remaining few.

Still, I agree with the result, and I was certain I would be adamantly opposed after I read the fact summary. The SCC certainly does a better job than any other institution at changing my initial impression.