Rule 57.07 - Liability of Solicitor for Costs
The Civil Rules Committee is considering the question of whether rule 57.07 of the Rules of Civil Procedure, the rule that allows a court to order costs against a solicitor personally, should be changed. This consultation paper describes some of the issues and invites comments and suggestions from the bench, the bar, and the public.
It is anticipated that the Civil Rules Committee will address the matter of reforming rule 57.07 in the fall of 2003, and, therefore, comments should be sent to the Committee before September 1, 2003 to allow them to be incorporated in a report to the Committee.
Comments may be sent to by e-mail to Paul Perell of the Secretariart of the Civil Rules Committee at the following e-mail address: firstname.lastname@example.org Alternatively, the comments may be sent by fax to 416-365-1876 or by mail to: Paul Perell, WeirFoulds, LLP, Suite 1600, The Exchange Tower, P.O. Box 480, 130 King Street West, Toronto, Ontario, Canada, M5X 1J5.
Rule 57.07 states:
Liability of Solicitor For Costs
57.07 (1) Where a solicitor for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order,
(a) disallowing costs between the solicitor and client or directing the solicitor to repay to the client money paid on account of costs;
(b) directing the solicitor to reimburse the client for any costs that the client has been ordered to pay to any other party; and
(c) requiring the solicitor personally to pay costs of any party.
(2) An order under subrule (1) may be made by the court on its own iniative or on the motion of any party to the proceeding, but no such order shall be made unless the solicitor is given a reasonable opportunity to make representations to the court.
(3) The court may direct that notice of an order against a solicitor under subrule (1) be given to the client in the manner specified in the order.
Rule 57.07 allows a court to order costs against a solicitor personally "where a solicitor for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default." An examination of the cases dealing with rule 57.07 reveals inconsistency in the interpretation of the rule. (See, P.M. Perell, "Ordering a Solicitor Personally to Pay Costs" (2001), 25 Adv. Q. 103.) Ontario courts are divided as to whether before an order may be made, it is necessary that the lawyer have been acting in bad faith or in some reprehensible way deserving of the court's discipline or whether the rule should be read literally with the jurisdiction being available if there is "undue delay, negligence or other default."
Although there is nothing in the language of subrule 57.07 (1) that speaks about bad faith or reprehensible conduct, the incorporation in some decisions of this element into the interpretation of the rule reflects the case law at common law about the power of a superior court to order costs against a solicitor. This power was founded upon the status of the solicitor as an officer of the court. The leading case was the House of Lords' judgment in Myers v. Elman,  4 All E.R. 484 (H.L.), which set a high threshold (although not linked to bad faith), providing that only "gross negligence" (p. 498, per Lord Atkin), "serious dereliction of duty" (p. 490, per Viscount Maugham) or "gross neglect or inaccuracy" (p. 509, per Lord Wright) would justify a costs order.
The high standard of bad faith or reprehensible conduct would appear to have been rejected in the language of subrule 57.07 (1) in Ontario, and it is interesting to note that the contemporary rule in England sets a lower standard where bad faith is not a constituent element. Under s. 51 (6) (wasted costs orders) of the English Supreme Court Act, 1981, as substituted by s.4 of the Courts and Legal Services Act 1990, the court has the power to make an order for wasted costs, which is defined in ss. 51 (7) as follows:
In subsection (6), "wasted costs" means any
costs incurred by a party
The English court's jurisdiction to award costs under s. 51 has been the subject of significant case law and commentary in England and recently was considered by the House of Lords in Medcalf v. Weatherill,  3 All E.R. 721 (H.L.) and by the English Court of Appeal in Ridehalgh v. Horsefield,  Ch 205 (Eng. C.A.). The English position is that bad faith is not a constituent element but that the jurisdiction to make an award under s. 51 against a lawyer is to be very cautiously exercised especially in circumstances where the defense to the solicitor's conduct may not be disclosed because of the client's solicitor and client privilege.
In Canada, the uncertainty about the operative standard for the rule has been heightened by the comments of McLachlin, J, as she then was, in the decision of Young v. Young (1993), 108 D.L.R. (4th) 193 (S.C.C.), which was an appeal from British Columbia. She stated at p. 284:
Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay. It is clear that the court possesses jurisdiction to make such an award, often under statute and, in any event, as part of their inherent jurisdiction to control abuse of process and contempt of court. [italics and underlines emphasis added]
The use of the conjunctive "and" would appear to indicate that bad faith is a requirement for an order of costs against a solicitor. This position is supported by the Ontario Court of Appeal's decision in Schwisberg v. Perry Krieger & Associates (1997), 9 C.P.C. (4th) 388 (C.A.). In Schwisberg, the Court cited McLachlin J.'s comments and stated that they had "direct application" in Ontario. The decisions of Young and Schwisberg, however, are inconsistent with many lower court decisions where costs have been awarded against lawyers who were not acting in bad faith but simply made a mistake that wasted costs. It is also inconsistent with the English jurisdiction at least insofar as bad faith is not a requirement under the English rule. However, Young and Schwisberg are consistent with the English position insofar as they recognize that the jurisdiction to award costs against a lawyer is to be cautiously exercised.
The current state of uncertainty revives the policy issues underlying rule 57.07. The main policy idea is that in a regime where costs are awarded, in part, as a way to manage due process and, in part, to compensate a party for the expense of being put to litigation, there may be occasions where it is not fair to impose the burden of costs on a party because the costs would not have been incurred but for a wrong decision or activity by a lawyer acting for one of the parties. Put shortly, the costs are wasted costs because of a lawyer's conduct and it seems fair that the lawyer solely should assume the responsibility for those costs. It, however, has proved problematic to set the standard that justifies making the lawyer assume the burden of the wasted costs personally. The history of the rule's development, and the case law reveals that there is a tension between setting the standard for a costs order against a solicitor too high, which would make the rule available only for egregious cases of lawyer misconduct and make the rule under-inclusive, and setting the standard too low, which would have a chilling effect on advocacy and make the rule over-inclusive. In this last regard, anecdotal evidence and the review of the case law suggests that litigants frequently have resort to rule 57.07 and that the rule is being used as a technical device to divide lawyers from their clients and to increase the costs of litigation. Whatever the standard, a further problem is that it is difficult to determine whether the lawyer has fallen below it in circumstances where the obligations of solicitor and client privilege may prevent the lawyer from justifying his or her conduct. (The problems associated with this aspect of the rule are considered at great length in the recent English case law.) Unfortunately, rule 57.07 motions have a tendency to increase costs and delay substantially.
The current situation raises the question of whether the Civil Rules Committee ought to reconsider the rule and perhaps to re-calibrate its scope. For example, the Committee could raise the standard for an order by making it clear that "bad faith" was an element. This approach could be implemented by amending the wording of the rule as follows:
57.07 (1) In any proceeding where a solicitor for any of the parties has acted in bad faith and in manifest disregard of the interests of justice and has thereby caused costs to be incurred improperly, or without reasonable cause, or wasted by undue delay, negligence or other default, the court may make an order, . . .
Conversely, the Committee could make it clear that bad faith was not an element by introducing a new subrule as follows:
An order under subrule (1) may be made without a finding that the solicitor acted in bad faith.
Alternatively, the Committee could introduce a new rule that would capture bad faith and reprehensible conduct but be narrower in scope than the current version of rule 57.07 (1) in exposing lawyers to costs orders. For example, a new rule might state:
57.07 (1) Where a party incurs unnecessary costs as a result of the acts or omissions of a solicitor of record acting
(a) in bad faith and in manifest disregard of the interests of justice, or
(b) with the intent to delay or to obstruct the proceedings, or
(c) in a way that would be manifestly unreasonable for a solicitor of record to take instructions to act
the court may make an order, . . .
Other formulations of the rule are, of course, possible and the Civil Rules Committee would benefit from the comments and suggestions of the bench, bar, and public.