On October 28, 2011 the Supreme Court of Canada ruled that the Canadian Human Rights Tribunal cannot award legal costs to a successful complainant. Although the Canadian Human Rights Act (the “Act”) permits the Tribunal to award compensation for “expenses incurred” because of discrimination, the Supreme Court held “expenses” does not include legal “costs”.

The human rights legislation in many provincial and territorial jurisdictions has specific provisions granting the relevant human rights tribunal the power to award legal costs, in addition to other forms of compensation, to a successful party. Often, there is a “one sided costs regime”: a tribunal has the power to award legal costs to a successful complainant, but not to a successful respondent. This one-sidedness is often justified based on “access to justice” on the assumption there will be an imbalance of power and resources between most complainants and respondents (since most complainants are individuals and most respondents are corporations) making a costs award more significant to a complainant than a respondent.

However, the human rights legislation in the federal jurisdiction and in Ontario and New Brunswick do not expressly provide for any cost awards by human rights tribunals; although the Nova Scotia Human Rights Act was recently changed to allow for the awarding of costs as set out in regulations, as yet there are no regulations in force. There has long been debate over whether a human rights tribunal in these cases has the power to order the unsuccessful party to compensate the successful party for legal costs. In Canada (Canadian Human Rights Commission) v. Canada (Attorney General), the Supreme Court of Canada settled this debate in the federal jurisdiction with a decision that will also have significant implications to the debate in Ontario and New Brunswick.

COMPLAINT AND TRIBUNAL DECISION

Donna Mowat was a Master Corporal in the Canadian Armed Forces, a federally regulated employer subject to the Canadian Human Rights Act (“Act”). As noted above, the Act does not expressly grant the Canadian Human Rights Tribunal (the decision-maker responsible to hear human rights complaints filed under the Act) the authority to award a successful party compensation for costs.

In June 1998 Ms. Mowat filed a human rights complaint under the Act alleging discrimination on a number of grounds of workplace harassment, including sexual harassment. She claimed compensation of $430,685 excluding her legal costs.

Although the Canadian Human Rights Commission referred Ms. Mowatt’s complaint to a hearing, it decided it would not itself participate in the hearing to represent the public interest before the Tribunal, as it had historically done. Ms. Mowat thus proceeded with her own legal counsel. With the Commission no longer leading the case at the hearing, there were difficulties in how the matter proceeded, and the Tribunal noted significant shortcomings in how Ms. Mowat’s claim was presented.

The hearing took approximately six weeks; the transcript of the evidence at the hearing was over 4,000 pages long with more than 200 exhibits. Although the Tribunal did find Ms. Mowat’s employer discriminated against her based on sexual harassment, it dismissed all of her other discrimination allegations. The Tribunal awarded Ms. Mowat compensation of $4,000, plus interest, for pain and suffering to the maximum of $5,000 (the cap under the Act at the time).

Ms. Mowat then asked for legal costs of $196,313. The Tribunal concluded that the balance of previous human rights and other administrative body decisions supported the view that “expenses” is broad enough to include legal costs, and noted that a costs award was necessary to provide “a meaningful remedy for those who have suffered discrimination”. It thus held that the Act gave it the power to award costs to a successful complainant, and awarded Ms. Mowat $47,000 in legal costs. Click here to read the Canadian Human Rights Tribunal’s decision.

REVIEW AND APPEALS

At the employer’s request, the Tribunal reviewed its own decision and confirmed it. The employer then asked the Federal Court to review it; the Federal Court found that the Tribunals’ decision was reasonable, and confirmed it. Click here to read the Federal Court’s decision.

The employer then successfully appealed the question to the Federal Court of Appeal. The Federal Court of Appeal overruled the Tribunal and the Federal Court, holding “costs” is a legal term of art that cannot be included in the general term “expenses”, but must be specifically included in the legislation in question (in this case, the Act). In the course of its extensive analysis, the Federal Court of Appeal noted that although the power to award costs might be desirable from an “access to justice” perspective, that is a policy matter for Parliament rather than the courts. Click here to read the Federal Court of Appeal’s decision.

SUPREME COURT OF CANADA

Ms. Mowat appealed the decision about legal costs to the Supreme Court of Canada. The Supreme Court of Canada defined the issue as the interpretation of section 53(2)(c) of the Act, which gives the Canadian Human Rights Tribunal the power to order a discriminatory party to “compensate the victim for any or all of the wages that the victim was deprived of and for any expenses incurred by the victim as a result of the discriminatory practice” (emphasis added).

The interpretation of this section of the Act, which applies only to successful complainants, raised issues about formal equality (the concern about the fairness of a one-sided costs regime), and about the application of “access to justice” as an unwritten constitutional principle in statutory interpretation. The Tribunal itself, and some interveners at the Supreme Court of Canada level, argued the Court should interpret the Act purposively to empower the Tribunal to award legal costs; otherwise any victory for a complainant would be “pyrrhic”.

The Supreme Court of Canada, however, found the Tribunal’s decision that it had the authority to award legal costs to a successful complainant as part of its power to compensate for “expenses incurred” was an unreasonable one. The Supreme Court of Canada concluded that the Tribunal has no authority to make such an award because Parliament did not intend “expenses incurred” to include legal costs. Click here to read the Supreme Court of Canada’s decision.

WHAT IT MEANS TO EMPLOYERS

For employers subject to federal legislation, or to the provincial human rights legislation of Ontario or New Brunswick, the Supreme Court of Canada’s decision brings good news: such employers will not be made to feel the additional sting of costs being awarded against them when a complainant is successful, even only on a small part of a claim, unless and until there is a change to the applicable human rights legislation.

While the decision will have little direct impact on employers in Provinces where human rights legislation already expressly grants the relevant tribunal the authority to award legal costs to a successful complainant, it may be relevant to the interpretation of other “quasi-constitutional” legislation like the Canadian Bill of Rights and the Official Languages Act. As well, even where the human rights legislation expressly gives the tribunal the authority to award costs to a successful party, most tribunals have been reluctant award legal costs against an employee – and in favour of a successful employer – even where the complaint lacked merit; it is unlikely this decision will change that reluctance.

Some commentators have criticized the decision, saying it punishes a successful claimant with a legitimate complaint, and trivializes the guarantee of equality in human rights laws by putting the burden of enforcement on private individuals. However, employers might view it differently: as a useful deterrent to frivolous or vexatious complainants. Employees who need to hire counsel to represent them if a complaint goes to a hearing may now think twice before taking matters that far.

The Supreme Court of Canada’s resolution of the costs issue also has practical importance to the way in which a party deals with a human rights complaint. A human rights tribunal (or another kind of administrative tribunal) may or may not have the authority to award costs; legal advice on this issue at the outset of any complaint will factor into a party’s strategic decisions in its defence of a claim against it:

• Where a tribunal can award costs, it is important to understand the basis for such awards, and to make costs an issue in the proceedings in a way that will help build a defence or encourage resolution of a complaint; and
• Where a tribunal cannot make costs awards, structuring settlements offers to complainants with legal representation to include a component for legal costs may be a deal sweetener for a claimant whose eventual damages, like Ms. Mowat’s, could be far less than the cost to pursue the claim.

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