Costs or no costs? Reasonable or correct? 

publication 

November 2011

Employment and Labour Bulletin

While federally regulated employers may not have been waiting with bated breath for the long-coming outcome of Canada (Canadian Human Rights Commission) and Mowat v Canada (AG)1 ("Mowat"), it will permit them to breathe a little easier. In Mowat, the Supreme Court of Canada ruled that the Canadian Human Rights Tribunal does not have the ability to award costs to a successful complainant under the Canadian Human Rights Act. More importantly, it also held that the Tribunal's decision was subject to review on a standard of reasonableness, but that its decision was unreasonable.

SCC on costs

Mowat was a member of the Canadian Forces who filed a varied complaint about her treatment as a female. Ultimately she was awarded $4,000 for sexual harassment to compensate for "suffering in respect of feelings or self respect." The Tribunal proceeded to consider her claim for legal costs. It awarded her $47,000 for costs, a decision that was upheld by the Federal Court but overturned by the Federal Court of Appeal. The SCC upheld the Court of Appeal's decision on the issue of costs.

The Act provides that the Tribunal can "compensate the victim for … any expenses incurred by the victim as a result of the discriminatory practice." The SCC found that "expenses" do not include legal costs. The SCC held that if Parliament had intended for costs to be awarded, it would have included the familiar and widely accepted legal term "costs" in the Act. This position was supported by the fact that there had been numerous unsuccessful attempts to amend the Act to include the ability to award costs and that costs are specifically referenced in provincial and territorial human rights legislation.

standard of review

A second issue before the SCC in Mowat was what standard of review should be applied to a decision of the Tribunal. Must the decision be correct or would the Court defer to a standard of reasonableness?

The SCC held that the Tribunal's decision to award costs was reviewable on a standard of reasonableness. It held that not all questions of general law before the Tribunal are issues of "central importance to the legal system" or fall outside an adjudicator's "specialized area of expertise." Cost awards are "inextricably intertwined" with the Tribunal's mandate and expertise to make factual findings relating to discrimination. The Tribunal was interpreting its enabling statute when deciding to award costs, and simply had to do so in a reasonable fashion. The SCC held that decision was not reasonable.

administrative law consequences

The reasons in Mowat will interest those who advise or appear before administrative tribunals. Although the SCC ultimately overturned the Tribunal's award of costs, some parties will be comforted by the fact that the SCC applied the more deferential standard of reasonableness to the Tribunal's decision. Those challenging a tribunal decision related to process, such as costs, should be prepared to show that the decision was not in a range of reasonable outcomes based on the relevant statute.

what Mowat means for employers

It should be noted that the majority of complaints with respect to human rights matters are against provincially regulated employers. Each province has unique legislation. Some – such as Alberta, Quebec, P.E.I. and Newfoundland – specifically allow costs to be awarded in any human rights case. Others such as – Manitoba, Saskatchewan and British Columbia – permit awarding costs in specific circumstances. Costs awards are not provided for in human rights legislation in Ontario, New Brunswick and Nova Scotia.

The inability to award costs in Ontario is a double-edged sword for provincially regulated employers. On the one hand they need not fear large cost awards against them in losing applications. On the other, the legislation has been amended so that there is no longer any ability to weed out frivolous and vexatious claims at an early stage without an oral hearing. Further, free resources such as the Human Rights Legal Support Centre are available to complainants. Employers are forced to spend substantial legal fees which are not recoverable, defending complaints regardless of their merit. Accordingly, there are little to no repercussions for complainants commencing frivolous claims.

The Mowat decision will provide some peace of mind for federally regulated employers who are often the target of disgruntled employees. Employers will not be forced to pay costs for complaints that make it to a hearing, even if the complaint is sustained. It may be that federally regulated employers witness some screening out of tenuous claims on the basis of the SCC's decision and complainants will be encouraged to settle matters early knowing they will not be reimbursed for any costs incurred.

by Jennifer Bond and Adam D. H. Chisholm

1 2011 SCC 53.

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2011