March 26, 2014

The Ontario Court of Appeal’s decision in Marcus v. Cochrane (released March 20, 2014) provides a clear statement of the court’s willingness to take a hard look at the proportionality of costs awards, and reduce costs substantially, if necessary.

The appeal arose out of a claim that Louise Marcus (“Marcus”) brought against her former lawyer, Carol Ann Cochrane and her law firm (collectively, “Cochrane”).  Cochrane represented Marcus in her separation from her former husband. Marcus claimed damages of $72,634.78 against Cochrane, which was a sum equal to the equalization payment which Marcus claimed would have been due to her had Cochrane acted properly.

Following an 8 day trial, Justice Warkentin found that Cochrane was not negligent, and dismissed Marcus’ claim. In determining costs, the trial judge held that full indemnity costs were appropriate. Marcus persisted with her claim, in spite of the overwhelming evidence in favour of Cochrane. As well, by claiming that she had not received certain emails from Cochrane, Marcus had “in essence … accused Ms. Cochrane of dishonesty.” If Marcus’ accusation had been found to be true, this would have had a “long lasting, negative effect on Ms. Cochrane’s career, including a likely disciplinary hearing with the Law Society.” The trial judge ordered that Marcus pay Cochrane’s costs of $160,706.99, which represented costs on a full indemnity scale.

Marcus appealed the trial judge’s decision with respect to negligence, damages and costs.  The Court of Appeal upheld the trial judge’s decision on the first two grounds, but allowed Marcus’ appeal on costs.  Justice Goudge, writing on behalf of the court, found that the trial judge erred in awarding costs on a full indemnity scale. Marcus’ conduct at trial was not reprehensible (one reason was that he did not think that Marcus’ denial of having received Cochrane’s emails meant that he was accusing Cochrane of dishonesty). The usual partial indemnity costs scale therefore applied.

As for quantum, the Court of Appeal found that the dispute was“essentially about a claim for approximately $80,000.00.” Yet Marcus’  bill of costs was $172,645.55, and Cochrane’s bill of costs was $160,706.99. The contrast between “what this dispute was about and what was spent on it [was] stark and difficult to justify.” The principle of proportionality, the Court of Appeal found, needs to be applied by counsel, with the assistance of the trial judge, as the “health of the justice system depends on it.” The Court of Appeal reduced Cochrane’s costs award at trial to $60,000.00 inclusive of disbursements, payable by Marcus.

Was the essence of the dispute only about $80,000.00? Faced with the prospect of a negligence finding against her, and suggestions that she may have been dishonest, Cochrane probably did not think so.  However, this costs decision is a cautionary tale: the principle of proportionality may be in the eye of the beholder.

With its call for access to justice, this decision is a good complement to the recently-released SCC decision on summary judgment in Hryniak v. Mauldin that Justin de Vries most recently blogged about.