



COURT OF APPEAL FOR ONTARIO

CITATION: Sarnia (City) v. River City Vineyard Christian
    Fellowship of Sarnia, 2015 ONCA 732

DATE: 20151030

DOCKET: C58676

Doherty, Epstein and Tulloch JJ.A.

BETWEEN

The Corporation of the City of Sarnia

Respondent (Applicant)

and

Trustees of River City Vineyard Christian
    Fellowship of Sarnia

Appellant (Respondent)

Murray Klippenstein and Kent Elson, for the appellant

Joseph J. Hoffer and Laura M. McKeen, for the respondent

Reema Khawja and Cathy Pike, for the intervener, Ontario
    Human Rights Commission

Additional reasons concerning costs to the judgment
    reported at
Sarnia (City) v. River City Vineyard Christian Fellowship
    of Sarnia
, 2015 ONCA 494, 39 M.P.L.R. (5th) 29, allowing the appeal by the
    appellant (respondent).

COSTS ENDORSEMENT

Overview

[1]

These reasons follow this courts decision dated July 3, 2015, in which the
    appellant, Trustees of River City Vineyard Christian Fellowship of Sarnia
    (River City), was successful in its appeal. River City now seeks its costs
    for both the appeal and the proceedings below, submitting that it should be awarded
    costs on a full indemnity basis in the amount of $163,479.54.

[2]

The respondent, the Corporation of the City of Sarnia, submits that no
    costs should be awarded, as this appeal stems from public interest litigation.
    In the alternative, if costs are to be awarded, they should be fixed at a
    nominal amount of only $10,000.

[3]

For the reasons that follow, we are of the view that costs should follow
    the event and be awarded to River City on a partial indemnity basis fixed in
    the amount of $90,000, inclusive of H.S.T. and disbursements.

A.

Facts

[4]

River City is a church in the City of Sarnia. It
    has operated a mens homeless shelter in its church basement since 2006. Sarnia
    opposed its operation on the basis that it breached the Citys zoning by-law,
    By-law No. 85 of 2002 (the By-law). River City disagreed and continued to
    operate the shelter.

[5]

Sarnia applied to the Superior Court for an
    injunction to stop the operation of the shelter. River City brought a
    counter-application seeking a declaration that it was not contravening the
    By-law. River City further argued that, to the extent the By-law did prohibit
    the shelter, the By-law unjustifiably infringed on its freedom of religion as
    protected by the
Canadian Charter of Rights and Freedoms
. In 2014, the applications judge issued an injunction against River
    City, prohibiting it from operating the shelter because it contravened the By-law,
    and dismissed River Citys
Charter
claim.

[6]

On appeal, this court held that the applications
    judge erred in his interpretation of the By-law. River Citys operation of the
    homeless shelter did not contravene the By-Law. The shelter falls within the
    meaning of church-sponsored community activities and projects in the By-law
    when the words are read in their entire context and according to their
    grammatical and ordinary meaning.

[7]

As a result, it was not necessary to address the
Charter
claim. This court allowed the appeal
    and dismissed Sarnias application for an injunction. The parties were then invited
    to make written submissions on the costs of the appeal.

[8]

At the Superior Court, Carey J. determined that
    both parties would be responsible for their own costs, despite the City of
    Sarnias initial success.  At para. 28 of his reasons, he stated:

I have found the church's position that good
    works are part of their theological mandate to be sincerely held. The City has
    conceded that point. The church is a charitable enterprise and has invested
    over $100,000 into the shelter which has done much good. There was a novel
    legal issue here that was not frivolous and the church was relying on case law
    from neighbouring American jurisdictions that gave support to their position.
    The City has presumably much greater resources than the church and if not
    awarded their costs, although successful, will not be substantially
    disadvantaged. In the circumstances, both parties will be responsible for their
    own costs.

[9]

River City now submits that costs should be
    awarded on a full indemnity basis. It requests $163,479.54 in full indemnity
    costs for the application and appeal. In support, it submits that it is a
    public interest litigant with a small annual budget of $350,000 and no
    pecuniary interest in the proceeding. River City was motivated by a desire to
    continue its good work for the benefit of the community. Further, it raised
    important issues. In the alternative, River City requests its costs on a
    partial indemnity basis in the amount of $124,859.17.

[10]

The City of Sarnia, in response, submits that it
    too is a public interest litigant, exercising its obligation to enforce its
    By-law reasonably and in good faith, and that it would be appropriate for the
    court to award no costs in this matter. Should the court find that this is not
    an appropriate case to order no costs against the unsuccessful party, Sarnia requests
    that River Citys costs be fixed at $10,000 for the appeal and no costs for the
    application.

[11]

Below, we discuss why there are insufficient
    reasons to depart from the general rule that partial indemnity costs should be
    awarded to the successful party. We deal first with River Citys request for
    full indemnity, then discuss Sarnias submission that it is also a public
    interest litigant and that the appropriate order would be to award no or
    minimal costs against it. Finally, we consider r. 57.01 of the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194, and the
    reasonable amount of the award.

B.

Issues

1.
Is River City entitled to costs on a full indemnity     basis?

2.
Is the City of Sarnia, the unsuccessful party,          required
    to pay the usual partial indemnity costs         order?

3.
What is the appropriate quantum of the costs         award?

C.

Analysis

(1)

River City is not entitled to costs on a full
    indemnity basis

[12]

In exercising the courts discretion on costs, the basic rule is
    that costs on a partial indemnity scale follow the event:
Bell
    Canada v. Olympia & York Developments Ltd.
(1994), 17 O.R. (3d) 135
    (C.A.).
The general principle when an appeal is allowed is
    that the costs below and of the appeal are awarded to the successful appellant:
St. Jean (Litigation Guardian of) v. Cheung
,
    2009 ONCA 9, 45 E.T.R. (3d) 171, at para. 4.

[13]

Elevated costs are warranted by operation of an
    offer to settle under r. 49.10 of the
Rules of Civil Procedure

or where the losing party has engaged in behavior worthy of
    sanction:
Davies v. Clarington (Municipality)
,
    2009 ONCA 722, 100 O.R. (3d) 66, at para. 28. Here, there were no relevant offers
    to settle.  Furthermore, neither party alleged any reprehensible conduct by the
    other.

[14]

Courts have also, on occasion, awarded full indemnity costs when the
    action was of exceptional public interest and special considerations justified
    the order: see, for example,
PHS Community Services Society v.
    Canada (Attorney General)
, 2008 BCSC 1453,
302
    D.L.R. (4th) 740,
affd 2011 SCC 44,
[2011] 3 S.C.R.
    134
.

[15]

In
Carter v. Canada (Attorney
    General)
, 2015 SCC 5, [2015] 1 S.C.R. 331, the Supreme
    Court modified the test for an award of advance costs previously set out in
British
    Columbia (Minister of Forests) v. Okanagan Indian Band
,
    2003 SCC 71, [2003] 3 S.C.R. 371, and applied it to the consideration of
    special costs. At para. 140, the Supreme Court provided guidance on the
    exercise of judicial discretion when considering special costs in cases
    involving public interest litigation:

First, the case must involve matters of public
    interest that are truly exceptional. It is not enough that the issues raised
    have not previously been resolved or that they transcend the individual
    interests of the successful litigant: they must also have a significant and
    widespread societal impact. Second, in addition to showing that they have no
    personal, proprietary or pecuniary interest in the litigation that would
    justify the proceedings on economic grounds, the plaintiffs must show that it
    would not have been possible to effectively pursue the litigation in question
    with private funding. In those rare cases, it will be contrary to the interests
    of justice to ask the individual litigants (or, more likely, pro bono counsel)
    to bear the majority of the financial burden associated with pursuing the
    claim.

[16]

It is our view that the circumstances of this
    case do not involve matters of public interest that are truly exceptional. We
    agree that the constitutional argument raised by River City  that its
    religious freedoms would be infringed by shutting down the shelter  was a
    novel issue. It was also a reasonable alternative position to advance in the
    context of the litigation. However, in our view, the issue did not have a significant
    and widespread societal impact. It was not of exceptional public importance.
    Furthermore, issues of public importance do not automatically entitle a
    litigant to preferential treatment with respect to costs:
Little
    Sisters Book & Art Emporium v. Canada (Commissioner of Customs &
    Revenue Agency)
, 2007 SCC 2, [2007] 1 S.C.R. 38, at para.
    35.

[17]

Here, the issues and the impact of the
    proceedings were relatively narrow. It was unnecessary to consider the
Charter
argument in light of the analysis of the By-law. The outcome
    affected only the parties and the constituents they served and represented. The
    constitutional issue was not of comparable significance or high public interest
    as, for example, physician-assisted suicide in
Carter
or safe injection facilities in
PHS
.

[18]

Almost all constitutional litigation is of some
    public importance. The Supreme Court cautioned, however, against special costs
    becoming routine in public interest litigation:
Carter
,
at para. 137. Therefore, in the circumstances of this case, we do
    not see any basis for deviating from the general rule that partial indemnity
    costs be awarded to the successful party.

(2)

The unsuccessful party, the City of Sarnia, is
    required to pay a costs award

[19]

The City of Sarnia submits that it should be
    exempt from the ordinary rule that costs follow the event. Its argument is
    based on the five factors set out in
St. James Preservation Society
    v. Toronto (City)
(2006), 272 D.L.R. (4th) 149 (Ont. S.C.), revd on other
    grounds,
2007 ONCA 601, 286 D.L.R. (4th) 146. These factors
    are as follows:

a)

The
    nature of the unsuccessful litigant;

b)

The nature of
    the successful litigant;

c)

The nature of
    the dispute  was it in the public interest;

d)

Has the litigation
    had any adverse impact on the public interest; and

e)

The financial
    consequences to the parties.

[20]

I will elaborate on the
St. James
criteria.

a)

The
    nature of the unsuccessful litigant

[21]

Here, Sarnia is a municipality that was acting
    on behalf of its constituents and in good faith to enforce its by-laws. Sarnia
    had a genuine interest in this litigation and there were no other potential
    litigants who were better suited to have brought the application. It had no
    pecuniary interest in the litigation. However, the City of Sarnia was not a
    public interest litigant. It was faced with a challenge to the interpretation
    of one of its by-laws, and brought an injunction in Superior Court to defend
    its position. This is central to its functions as a municipality. In other
    words, just because the City serves the public does not mean that any
    litigation in which it finds itself is public interest litigation.

b)

The nature of the
    successful litigant

[22]

Like
    Sarnia, River City had no pecuniary interest in this proceeding. It is a
    charitable enterprise that was motivated by a desire to benefit the community,
    and used its own funds to do so. River City had invested $100,000 into the
    shelter to ensure compliance with building and fire requirements. Its yearly revenue
    for 2013 and 2014 was approximately $350,000, and it ran a deficit in both of
    these years.

[23]

In
    addition, River City is a private actor that was required to participate in
    this litigation. In
St. James
, Ducharme J. commented that it is more
    difficult to justify depriving a successful private actor, rather than a
    government actor, of the costs order they would normally receive in public
    interest litigation: at para. 23. We agree. This is precisely the case in these
    circumstances, and in our view, this factor weighs heavily against Sarnia in
    the determination of whether they should be exempt from an ordinary costs
    order.

c)

The nature of the
    dispute  was it in the public interest?

[24]

The
    applications judge found that this case raised a novel legal issue and
    therefore departed from the normal cost rules that would have required River
    City to indemnify Sarnia, the successful party at the Superior Court
    proceeding. As mentioned, the novel issue was River Citys argument that zoning
    by-laws prohibiting shelters violate their right to religious freedom under s.
    2(a) of the
Charter
. River City raised this argument to counter the
    injunction application brought by Sarnia. Though it was not necessary to decide
    the
Charter
issue, it was one of public importance and was reasonably
    brought in the circumstances of the litigation.

[25]

Though
    its position was not devoid of merit, Sarnias interest in enforcing a zoning
    By-law was narrow and did not extend beyond the immediate interests of its
    constituency. Sarnia did not raise an issue of practical significance to the
    public at large: see
St. James
, at para. 29.

[26]

Sarnia relies on
Guelph (City) v. Wellington-Dufferin-Guelph
    Health Unit
, 2011 ONSC 7523, 97 M.P.L.R. (4th) 105, as an
    example in which an unsuccessful litigant, the City of Guelph, was excused from
    paying costs because it was acting in the public interest. That case, however,
    involved the process that must be followed by health boards in assigning
    spending to public health, and the spending priority that public health should
    be given in relation to education, recreation, and community matters. Price J.,
    at para. 25, described these as issues which were of significance not only to
    the City of Guelph and the Board of Health, but to municipal governments and
    boards of health across the province. Another consideration in
Guelph
was that the plaintiff City was a principal funding member of the
    defendant Board of Health. Therefore, without any costs order being made
    against it, the City of Guelph was going to be required to pay 46% of the
    Boards costs if the legal expenses exceeded their base budget. This is not the
    case for Sarnia and River City. In our view, the public interest issues in
Guelph
were of broader significance than those raised by Sarnia, and the
    circumstances distinguish the two situations.

d)

Whether the litigation
    had any adverse impact on the public interest

[27]

Neither
    party behaved in a way that was vexatious, frivolous or abusive. The litigation
    by Sarnia was necessary to clarify the scope and interpretation of the By-law,
    and the
Charter
claim was reasonably brought by River City.

e)

The financial
    consequences to the parties

[28]

The
    City of Sarnias resources are significantly greater than River Citys.
    Sarnias 2013 financial statements indicate that the city had revenue of over
    $109 million and an accumulated surplus of over $521 million in that year. As
    mentioned, River City operates on a very small budget of approximately $350,000
    per year. It would not have been able to fund a lawsuit of this magnitude
    without the
pro bono
assistance of counsel. River City would be
    substantially disadvantaged should no costs be awarded, despite its success on
    appeal. It is inappropriate in this case for River City and its
pro bono
counsel to bear a financial burden that is normally transferred, in part, to
    the unsuccessful party.

Conclusion

[29]

In applying these criteria to this case, the Citys only compelling argument
    is that it had no pecuniary interest in the litigation. Without more, the City of
    Sarnia, the unsuccessful party, should not be excused from paying a normal
    costs award.


(3)

The reasonable quantum of the costs award

[30]

In light of our conclusions on River Citys
    request for full indemnity and Sarnias request for a no costs order, there is
    no reason to depart from the normal rule that costs follow the event.

[31]

In considering the quantum, r. 57.01(1) outlines
    the factors that the court may consider in exercising its discretion. We also
    note the principle expressed in
Boucher v. Public Accountants
    Council (Ontario)
(2004), 71 O.R. (3d) 291 (C.A.), at
    para. 26: [T]he objective is to fix an amount that is fair and reasonable for
    the unsuccessful party to pay in the particular proceeding, rather than an
    amount fixed by the actual costs incurred by the successful litigation.

Costs of the Application

[32]

River City claims $94,414.32 for its costs of
    the application. In our view, it would not be fair and reasonable to order
    Sarnia to pay this amount.

[33]

At its core, this matter involved the
    interpretation of a by-law. There was a secondary
Charter
argument, but it turned out to be irrelevant. Regardless, the
Charter
argument was not particularly complicated.

[34]

In deciding what is fair and reasonable, the
    expectation of the parties concerning the quantum of a costs award is a
    relevant factor:
Boucher
, at para. 38; r.
    57.01(1)(0.b). Sarnias partial indemnity costs for the application were
    $60,030.05. The amount claimed by River City involved over 400 hours of work in
    preparation for the application. Despite the need to prepare for the
Charter
argument first heard before the applications judge, this total is difficult
    to justify.

[35]

Taking into consideration the various factors
    set out in
Boucher
, River City is entitled to its
    costs in the amount of $60,000, inclusive of H.S.T. and disbursements, for the
    application.

Costs of the Appeal

[36]

River City was wholly successful on appeal and
    requests $34,444.85 in partial indemnity costs. The time spent by counsel was
    significantly less than for the application, as all of the same arguments made
    before the applications judge were made before us. Again, despite the
Charter
argument, the matter was not complicated.

[37]

The expectation of the parties concerning the
    quantum of a costs award is relevant. Sarnias costs for the appeal were
    $40,235.46. Both parties have therefore sought large amounts in their bills of
    costs. Considering
Boucher
, r. 57.01(1),
    and the reasonable expectations of the parties, we are of the view that $30,000,
    all inclusive, is a fair and reasonable costs award for the appeal.

D.

Conclusion

[38]

In all the circumstances, we would grant River
    Citys request for partial indemnity costs in the total amount of $90,000,
    inclusive of H.S.T. and disbursements.

Doherty
    J.A.

Gloria
    Epstein J.A.

M.
    Tulloch J.A.


