



COURT OF APPEAL FOR ONTARIO

CITATION: Hunt v. Worrod, 2019 ONCA 540

DATE: 20190627

DOCKET: M49150 (C65477)

Sharpe, Pepall and Roberts JJ.A.

BETWEEN

Kim Kevin Hunt
c/o Bradley James Hunt and Justin Abraham Hunt

Applicant
(Respondent/Responding Party)

and

Kathleen A. Worrod

Respondent (Respondent/Responding Party)

and

D. Andrew Thomson

Non-Party (Respondent/Responding Party)

and

Legal Aid Ontario

Non-Party (Appellant/Moving Party)

Gideon Forrest and Mitch Stephenson, for the appellant/moving
    party Legal Aid Ontario

Michael E. Barrack, Andrea McEwen and Kimberly A.
    Whaley, for the respondent/responding party Kim Kevin Hunt c/o Bradley James
    Hunt and Justin Abraham Hunt

Rose Muscolino, for the respondent/responding party D. Andrew
    Thomson

No one appearing for the respondent Kathleen A. Worrod

Jodi Martin and Elizabeth Rathbone, for the Intervener
    Ontario Association of Child Protection Lawyers

John Phillips and W. Cory Wanless, for the Intervener
    Family Law Association

Heard: May 16, 2019

On appeal from the order of Justice Edward J. Koke of the
    Superior Court of Justice dated April 17, 2018, with reasons reported at 2018
    ONSC 2133, 9 R.F.L. (8th) 199, and the order dated May 24, 2018, with reasons
    reported at 2018 ONSC 3093, 9 R.F.L. (8th) 212.

Pepall J.A.:

Introduction

[1]

This appeal concerns an award of costs of
    $192,639.77 ordered to be paid by a non-party, Legal Aid Ontario (LAO), due
    to its role in funding a party in a family law dispute. The application judge
    concluded that by failing to adequately monitor and assess the merits of the
    defence it was funding, LAO engaged in an abuse of process. For the reasons
    that follow, I would set aside that award of costs.

Background

[2]

In June 2011, Kim Hunt suffered a catastrophic
    brain injury as a result of an ATV accident. He remained in hospital care until
    October 21, 2011. His sons, Justin Abraham Hunt and Bradley James Hunt, were
    appointed as Kims guardians of property and personal care (collectively, the
    Hunt respondents).

[3]

Kim had an on-and-off relationship with Kathleen
    Worrod for several years prior to his accident. They had jointly purchased a
    home in Novar, Ontario in June 2010. In December 2010, they had entered into a
    signed Property Settlement Agreement pursuant to which Kim paid Kathleen for
    her share of the down payment on the home. However, title to the property was
    never transferred into Kims name alone. Three days after Kims release from
    hospital in October 2011, he married Kathleen.

[4]

In their capacity as Kims litigation guardians,
    Justin and Bradley commenced an application against Kathleen seeking a
    declaration that the marriage was void
ab initio
, and that Kim was the
    sole owner of the Novar property. They also requested an order prohibiting
    contact between Kim and Kathleen. They took the position that Kim did not have
    capacity to marry, that Kathleen had no interest in the property, and that
    further contact with Kathleen would be detrimental to Kims health.

[5]

LAO granted Kathleen a legal aid certificate
    and funded her legal fees throughout the proceedings. Kathleen hired the
    respondent, Andrew Thomson, to be her counsel in the litigation.

[6]

Thomson requested and received authorization
    from LAO to obtain a report from a clinical neuropsychologist to opine on
    whether Kim had the cognitive competence to provide direction regarding the
    issue of his guardianship. The report is dated January 12, 2015 and is based
    on assessments conducted in September and November 2014. The reports authors
    concluded that based on his emotional desire to have a relationship, Kim wanted
    to live with Kathleen. However, he lacked the understanding of his need for
    guardianship, and ultimately did not have the cognitive competency to make a
    decision regarding his guardianship. The report did not support the position on
    Kims capacity that Kathleen had taken in the application. She did not call the
    authors of the report at trial nor did she adduce any medical evidence to
    support her allegation that Kim had capacity to marry in October 2011.

[7]

The trial lasted over 10 days. LAO was not a
    party to the application and did not participate in the trial.

[8]

The Hunt respondents succeeded on all claims:
    see
Hunt v. Worrod
, 2017 ONSC 7397, 32 E.T.R. (4th) 232. The application
    judge found that Kim lacked capacity to marry and that the marriage was void
ab
    initio
. He concluded that the Property Settlement Agreement was
    enforceable, and that Kim held the sole equitable title to the Novar property.
    The application judge also granted an order permanently prohibiting all contact
    between Kim and Kathleen. In his subsequent reasons for decision on the issue
    of costs, the application judge characterized Kathleens claims as meritless:
Hunt v. Worrod
, 2018 ONSC 2133, 9 R.F.L. (8th) 199, at para. 49 (costs
    reasons).

(1)

April 17, 2018 Costs Order

[9]

The application judge held a hearing to consider
    the issue of the costs of the proceedings.

[10]

Prior to the costs hearing, counsel for the Hunt respondents had
    written to Thomson and LAO advising that their clients intended to seek costs
    from both Kathleen and Thomson personally, and from LAO.

[11]

In his costs reasons, the application judge observed, at para. 12,
    that Kathleen had moved to British Columbia in 2015 where she was now working
    at a Tim Hortons and that it did not appear that she had any assets. He ordered
    Kathleen to pay the Hunt respondents costs of $385,279.54 on a full recovery
    basis. He stated that the evidence strongly suggested that Kathleen would never
    be in a financial position to pay any of Kims legal costs: at para. 30.

[12]

The application judge turned next to the Hunt respondents request
    for costs against Thomson personally. Their request was based on Thomsons
    alleged failure to meet his reporting requirements to LAO. They submitted that
    had Thomson properly reported to LAO, LAO would not have continued to fund Kathleens
    defence. The application judge was not prepared to make an order of costs
    against Thomson stating, at para. 35:

I am not privy to Mr. Thomsons discussions
    with Legal Aid or with his client, which were privileged, and therefore I have
    no basis for finding that he acted improperly in his reporting requirements to
    Legal Aid. He presented himself as organized, efficient and courteous
    throughout the trial.

[13]

The application judge then focused his attention on the Hunt respondents
    request for costs against LAO.

[14]

He commented that he had not been directed to any cases where a
    court in Ontario had ordered LAO to pay the costs of a successful party: at
    para. 43. He acknowledged that in ordering costs against a non-party, a court
    should exercise caution and that the circumstances meriting such an award must
    be exceptional and clearly constitute an abuse of the courts process: at
    para. 45.

[15]

The application judge then considered the circumstances of this
    case. He found that LAO knew that Kim was a vulnerable individual. He explained
    that when LAO registered its lien against Kims property (i.e. the Novar
    property), it would have had notice of the Public Guardian and Trustees (PGT)
    Certificate of Incapacity to Manage Property that was registered on title. In
    addition, he reasoned that LAO presumably would have received a copy of the neuropsychological
    report because LAO had paid for the assessment and report: at para. 47. He
    concluded that LAO had failed to properly carry out its mandate to monitor the
    proceedings, contributed significantly to the hardships and challenges faced by
    Kim and his family, and needlessly wasted judicial resources: at para. 50. The
    application judge held that LAOs actions (or failure to act) constitute[d] an
    abuse of process, in that they undermined the public interest in a fair and
    just trial process and the proper administration of justice: at para. 52. 
    Relying on the courts inherent jurisdiction, he ordered LAO to pay $192,639.77
    to the Hunt respondents. This represented 50 percent of the full indemnity
    costs of $385,279.54 that the application judge had ordered Kathleen to pay. He
    also ordered LAO to pay the costs of the costs hearing to the Hunt respondents
    fixed in the amount of $21,281.47.

(2)

Subsequent Proceedings before the Application
    Judge

[16]

On receipt of the application judges reasons for costs, LAO brought
    a motion to reopen the evidence relating to costs and to vary the application
    judges April 17, 2018 costs decision. LAO sought to tender two affidavits that
    maintained that LAO had not received the neuropsychological report until
    shortly before the commencement of the trial and that it was unaware of the PGTs
    restriction on title to the Novar property until about six months prior to the
    trial. Days before the hearing of LAOs motion, Kathleen waived her right to
    privilege.

[17]

The application judge dismissed LAOs motion on May 24, 2018: see
Hunt
    v. Worrod
, 2018 ONSC 3093, 9 R.F.L. (8th) 212. He sought cost submissions
    from counsel but these were never filed.

(3)

Appeal Proceedings

[18]

On appeal, LAO challenges the application judges April 17, 2018 costs
    order against LAO, and his May 24, 2018 order refusing to reopen the evidence and
    to vary his costs award.

[19]

Prior to the hearing of this appeal, LAO brought a motion for
    directions before a single judge of this court. In accordance with Paciocco
    J.A.s procedural endorsement on the motion for directions, dated September 12,
    2018, LAO also seeks leave to admit fresh evidence consisting of the same two
    affidavits the application judge had refused to consider on the motion to vary
    the costs order. In addition, if necessary, it seeks leave to appeal the April
    17, 2018 costs order.

Analysis

(1)

Leave to
    Appeal is not Required

[20]

The first issue to address is whether LAO is required to obtain
    leave to appeal the costs order pursuant to s. 133(b) of the
Courts of
    Justice Act
, R.S.O. 1990, c. C.43 (CJA).

[21]

LAO argued that, with the exception of the person of straw
    category of awards under s. 131(1) of the CJA, non-party cost awards are made
    pursuant to the inherent jurisdiction of the court and as such, leave to appeal
    is not required. The respondents took no position on this issue.

[22]

Section 131(1) of the CJA provides:

Subject to the provisions of an Act or rules
    of court, the costs of and incidental to a proceeding or a step in a proceeding
    are in the discretion of the court, and the court may determine by whom and to
    what extent the costs shall be paid.

[23]

Section 133(b) provides:

No appeal lies without leave of the court to
    which the appeal is to be taken,

(b) where the appeal is only as to costs that
    are in the discretion of the court that made the order for costs.

[24]

In
1318847 Ontario Limited v. Laval Tool & Mould Ltd.
,
    2017 ONCA 184, 134 O.R. (3d) 641, Strathy C.J.O. confirmed that s. 131(1) authorizes
    cost awards against parties only. He explained that the person of straw
    exception permits a court to look behind a named party (i.e. the person of
    straw) to order costs against the true instigator or promoter of the litigation:
    at para. 46. As such, there are occasions when the real litigant is not named
    as a party to the proceeding but may be exposed to an adverse costs award under
    s. 131(1). Strathy C.J.O. held that apart from this statutory jurisdiction, the
    court has inherent jurisdiction to order costs against a non-party. Leave to
    appeal is required for costs awards made pursuant to statutory jurisdiction
    under s. 131(1) by virtue of the language of s. 133(b). There is no such
    requirement for an award of costs that relies on inherent jurisdiction.

[25]

Before the application judge, the parties agreed that the person of
    straw category was inapplicable. The application judge in making the costs
    award against LAO as a non-party expressly did not rely on statutory authority
    under s. 131(1) but on the courts inherent jurisdiction. In light of the jurisdictional
    basis for the award, the panel was satisfied that LAO was not required to
    obtain leave to appeal under s. 133(b) of the
CJA
.
    At the hearing of the appeal, counsel were so advised.

(2)

Appeal of the Costs Order Against LAO

[26]

This brings me to the appeal from the April 17, 2018 costs order
    against LAO. LAO anchors its appeal on two grounds. First, it submits that the
    application judge denied LAO procedural fairness. Second, LAO challenges both
    the legal and evidentiary basis for the costs award against it. The Hunt
    respondents resist LAOs costs appeal. Thomson takes no position.

[27]

The Family Lawyers Association and the Ontario Association of Child
    Protection Lawyers intervened on the appeal. They both provided submissions on
    the principle of cost awards against LAO in its capacity as a government
    sponsored funder of legal aid.

[28]

The interveners submit that the effect of the application judges
    decision will be to require LAO to independently and continuously scrutinize the
    factual and legal basis for opinion letters provided by private bar lawyers
    representing legal aid funded clients. They submit that this would require a
    diversion of LAOs limited resources away from providing funding, toward
    administrative costs of monitoring. They further submit that the decision will
    require LAO to seek or require waivers of privilege from legal aid clients in
    order to defend against potential claims for non-party costs. In sum, this
    precedent will cause a chill in the availability of legal aid funding, a
    reduction in the number of lawyers willing to accept legal aid certificates, a chill
    on advocacy by lawyers on LAO funded files, and an erosion of solicitor-client
    privilege.

[29]

As mentioned, LAO also seeks to set aside the application judges
    refusal to reopen the evidence and to vary his costs order, and brings a fresh
    evidence motion in support. In light of my conclusion on LAOs argument
    regarding the legal and evidentiary basis for the costs award, there is no need
    to address the procedural fairness ground of appeal, LAOs appeal from the
    refusal to reopen the evidence and vary the costs order, or its motion to admit
    fresh evidence.

Basis for the Costs Award against LAO

[30]

In my view, the costs order against LAO cannot stand. Fundamentally,
    the application judge misconstrued the role of LAO and there was no evidentiary
    support for his conclusion that there was an abuse of process by LAO due to its
    alleged failure to monitor the litigation that it was funding. Moreover, the
    application judges findings were inconsistent with his conclusions relating to
    the claim for costs against Thomson personally.

LAOs Role in the Litigation

[31]

LAOs role in the proceedings was limited to the provision of
    funding pursuant to a legal aid certificate issued to Kathleen, who then
    retained Thomson as counsel. In their costs submissions before the application
    judge, the Hunt respondents confirmed that they were not alleging bad faith by
    LAO. Their focus was on LAOs alleged failure to consider Kims vulnerability,
    and LAOs alleged failure to monitor the proceeding including its failure to
    consider the neuropsychological report that undermined Kathleens position and
    supported that of the Hunt respondents on the issue of capacity. They argue
    that LAOs liability for costs flowed from the inadequacy of LAOs ongoing
    assessment of the merits of the case it was funding, which involved a
    vulnerable party.

[32]

LAO is an independent and publicly accountable non-profit
    corporation:
Legal Aid Services Act, 1998
, S.O. 1998, c. 26, s. 3(4)
    (LASA). The Government of Ontario created LAO to establish and administer a
    cost-effective and efficient system for providing high quality legal aid
    services to low-income individuals in Ontario: LASA, s. 4. As stated in s. 14(2)
    of the LASA, LAO shall provide legal aid services in the areas of criminal and
    family law having regard to the fact that the private bar is the foundation for
    the provision of legal aid services in those areas. LAO does not represent the
    client nor does it direct the litigation. Rather, it provides the funding to
    the client to retain counsel from the private bar. The legal aid system in
    Ontario permits LAO to rely on the opinions of the private bar lawyers who have
    carriage of their clients files subject to a legal aid certificate. The system
    is not established on the basis that LAO is required to engage in a detailed factual
    and legal analysis independent of and disconnected from counsels legal opinion.
    The costs award against LAO based on its failure to adequately monitor the
    litigation is inconsistent with and would frustrate that statutory scheme.

[33]

An award of costs against LAO based on abuse of process must be
    viewed within this context.

[34]

As Strathy C.J.O. explained in
Laval Tool
, the courts
    inherent jurisdiction to order non-party costs is grounded in the courts
    inherent jurisdiction to deter abuse of process and when exercising inherent
    jurisdiction to award costs against a non-party, courts must do so sparingly
    and with caution: at paras. 68 and 72.

[35]

Abuse of process is a flexible doctrine:
Toronto (City) v.
    C.U.P.E
.
,
Local 79
, 2003 SCC 63, [2003] 3 S.C.R. 77, at
    para. 37;
Behn v. Moulton Contracting Ltd.
, 2013 SCC 26, [2013] 2 S.C.R.
    227, at paras. 40-41. The concept has been described as involving proceedings
    that are unfair to the point that they are contrary to the interest of justice,
    oppressive or vexatious, and violate the fundamental principles of justice
    underlying the communitys sense of fair play and decency:
C.U.P.E.
,
at para 35.

[36]

In examining costs against LAO for an alleged abuse of process, a
    distinction must be made between LAO as a party to litigation and LAO as a
    non-party statutory funder of litigation. When LAO is a party to litigation, as
    with any other party, it may be exposed to a costs award. By way of example, in
    an employment or civil action in which LAO is an unsuccessful party, it would
    be open to a judge to grant an adverse costs award: see e.g.
Legal Aid Ontario
    v. Gertler
,
2010 ONSC 6556.

[37]

In contrast, as a non-party, LAOs conduct must be viewed in the
    context of its statutory mandate and the regime of legal aid services in
    Ontario as it is set up by the LASA. Without evidence of something more, such
    as bad faith or a collateral or improper purpose in granting funding to a
    litigant, LAOs conduct in funding litigation pursuant to its statutory
    purpose, and any conduct incidental thereto, including its monitoring of the
    litigation it funds, cannot support a finding of abuse of process and a
    resulting adverse costs award.

[38]

Contrary to the submissions of the Hunt respondents, the LASA scheme
    is wholly unlike the framework that supports third-party funders in class
    proceedings. The legal framework governing third-party litigation funding is concerned
    with the potential harm to the administration of justice that may arise from a non-party
    profiting unduly from or unreasonably controlling anothers litigation: see
Houle
    v. St. Jude Medical Inc.
,

2018 ONSC 6352, 429 D.L.R. (4th) 739 (Div.
    Ct.), at para. 51. LAOs mandate is to administer government funding for low-income
    litigants, without any financial or other interest in the outcome of the
    proceedings. While it is true that pursuant to s. 46(4) of the LASA, any cost
    awards payable to the legal aid funded litigant are deemed the property of LAO,
    the decision to fund a litigant is driven by LAOs statutory mandate and associated
    funding criteria, not by the prospect of economic return to LAO.

Invasion of Solicitor-Client Privilege

[39]

Furthermore, even if a failure by LAO to monitor could anchor a
    finding of abuse of process, any conclusion of improper or inadequate conduct
    by LAO in its funding role would require the impermissible review of the
    reporting and opinion letters of the lawyer holding the legal aid certificate.
    The LASA sets up a tripartite relationship of solicitor-client privilege
    between the client, the lawyer, and LAO. Section 93 provides that the
    relationship between the lawyer providing legal aid services and the client is
    governed by solicitor-client privilege. Section 89 provides that communication
    between LAO and the client, and the lawyer and LAO is privileged to the same
    extent as solicitor-client communication. Thus, s. 89 allows for the legal aid
    funded lawyer to report to LAO on the progress of the case and on the clients
    continued eligibility for legal aid funding, and to provide opinion letters,
    without such reporting amounting to a waiver of solicitor-client privilege: s.
    89(3). The privilege over the reporting and opinion letters belongs to the
    client being funded, not to LAO. Put differently, the privilege over the
    letters is not LAOs to waive. The impermissible scrutiny of privileged
    territory which would be required to support a finding of failure to monitor
    runs counter to the scheme and regime of Legal Aid as it is constituted in
    Ontario. As LAO and the interveners submit,  allowing this scrutiny would risk
    putting LAO in a position where it must seek a waiver of privilege from clients
    in order to a mount a defence to claims against it for non-party costs.

Lack of Evidentiary Support

[40]

Quite apart from misconstruing LAOs role in litigation, there was
    also no evidentiary basis for such an award in this case. As mentioned, the
    gravamen of LAOs alleged conduct in this case was its continued funding in the
    face of knowledge of the vulnerability of the opposing party coupled with its
    failure to monitor. The application judge determined that this conduct amounted
    to an abuse of process. It was conceded by the Hunt respondents that they were
    not alleging bad faith on the part of LAO or that LAO had acted vexatiously.

[41]

Regardless of its knowledge of the PGT certificate registered on
    title, there is no question that LAO would have known about Kims vulnerable state
    based on an appreciation of the nature of the dispute, and the role of Kims
    sons as his litigation guardians. However, this fact standing alone could not
    serve as a foundation for a finding of abuse of process. Many an action
    involves a vulnerable party. One must then determine whether that fact coupled
    with knowledge of the neuropsychological report could anchor a finding of abuse
    of process. The application judge determined that upon receiving the report,
    LAO should have terminated its funding: costs reasons, at para. 52. The problem
    here is that while the report was arguably fatal to the issue of the validity
    of the marriage, it did not speak to the other two issues in play in the
    litigation: ownership of the Novar property and the merits of a no contact
    order. Further, as mentioned, the impact of the neuropsychological report on LAOs
    appreciation of the merits of the case would be subject to the opinion of
    counsel with conduct of the defence on behalf of Kathleen, an opinion that was
    privileged and not before the application judge when he made the costs award. The
    finding of abuse of process made by the application judge was not available on
    the evidence.

Inconsistent Findings

[42]

There is also the issue of the application to the costs award
    against LAO of the judges finding relating to the request for costs as against
    Thomson personally. The application judge considered the costs allegations asserted
    against Thomson to be serious in that they impugned Thomsons professional
    reputation and integrity. The Hunt respondents argued that Kathleens claim was
    without merit, and Thomson failed to meet his obligation to fully and properly
    report to LAO. They argued that had Thomson properly reported to LAO, LAO would
    not have continued to fund Kathleens defence. The application judge concluded
    that there was an absence of a factual foundation on which to base the
    allegations against Thomson.

[43]

The crux of the allegations against Thomson were substantially the
    same as those asserted against LAO. The application judge implicitly concluded
    that Thomson did not cause costs to be incurred without reasonable cause. He
    also recognized that Thomsons communications with Kathleen were privileged and
    therefore he had no basis for finding that Thomson acted improperly in his
    reporting requirements to LAO. He then proceeded to find LAO at fault.

[44]

His findings against LAO were inconsistent with his findings in
    favour of Thomson. There was nothing in the record that would permit the application
    judge to exonerate Thomson on the one hand and penalize LAO on the other.
    Moreover, as mentioned, he failed to consider that LAO had no ability to waive
    privilege over the opinions received from Thomson.

Disposition

[45]

For these reasons I would allow the appeal and set aside the costs
    order against LAO. I would dismiss the motions for leave to appeal and to admit
    the public importance affidavits to the extent they were filed in support of
    the leave motion, as being unnecessary. I would similarly dismiss the motion to
    set aside the application judges refusal to reopen the evidence and vary his
    costs order, and dismiss the motion to admit the two LAO affidavits as fresh
    evidence.

[46]

Counsel for the respondents ably argue that this is a unique case
    involving a vulnerable individual. Kims circumstances are most unfortunate.
    However, his misfortune does not render the award against LAO sustainable either in
    law or in fact.

[47]

That said, in light of the novel nature of the issues in dispute, I
    would temper the costs awards in favour of LAO. I would order the Hunt respondents
    to pay LAO $15,000 in costs on a partial indemnity scale inclusive of
    disbursements and applicable tax on account of the main appeal; I would reverse
    the award below for the costs of the costs hearing and order the Hunt respondents
    to pay LAO $4,621 for that hearing on a partial indemnity scale inclusive of
    disbursements and applicable tax. I would make no order for costs of the appeal
    of the refusal to reopen the evidence and vary the costs order. The interveners
    do not seek costs nor are they liable for any costs.

Released: RJS JUN 27, 2019

S.E. Pepall J.A.

I agree. Robert J. Sharpe J.A.

I agree. L.B. Roberts J.A.


