What if someone files an entirely frivolous lawsuit against you, refuses to settle, and forces you to go all the way to trial, where you successfully defend the action?
One would hope that you would be reimbursed for some of your legal costs. And in our civil court system, you would be. While you never get all of your legal fees back, you can recoup a substantial portion of them.
The same is true if you commence a legitimate court action, and the defendant refuses to settle and ultimately, you are successful at trial.
However, the reality is that we are seeing more and more litigation take place within human rights tribunals, and at least in the Human Rights Tribunal of Ontario, there is no authority to award costs to a successful party, no matter how frivolous the other party’s position may have been.
This can have dramatic consequences for how a party will approach litigation and what they may do in order to avoid costs that they know they will never recover, even if they have a legitimate legal position.
Human Rights Claims
Unlike our court system, which is driven by a loser pays principle, human rights claims do not attract cost consequences. The theory is that people should not be discouraged from bringing meritorious claims and enforcing their human rights by a fear of being ordered to pay significantly legal costs. This is based upon a desire to encourage access to justice.
However, one side effect of this is that in many cases, the respondent will have to make a business decision that has nothing to do with the merits of the case. They may be of the view, and correctly so, that the claim is without merit. However, they will also have to take into account the fact that in order to defend the claim, they will have to spend a substantial amount of money on legal fees, which they will never recover. As a result, many respondents will decide to pay a nominal amount of money to the complainant in order to settle. From a purely financial perspective, it makes more sense to spend $10,000 to settle a case than $20,000 to win it.
Once it becomes known that this is a possible outcome of filing a human rights complaint, unscrupulous individuals will file claims without any merit. Since they do not have to retain counsel to do so, they incur no costs and because of the lack of authority to award costs against an unsuccessful party, they also have no risk. while I do not mean to suggest that this is common, it is certainly true that there are people who will file claims because they believe it is likely that they will get some money out of the respondent.
The flip side is also true.
Some employers will respond to a human rights complaint by adopting a scorched earth approach to litigation. In other words, they will refuse to settle and instead will drive up the costs incurred by both parties, knowing that they can afford them while the complainant cannot. As a result of, they count on the fact that the complainant will be willing to settle for far less than they are entitled to in order to avoid extensive legal costs and delays if they pursue the matter all the way to a hearing.
This is something that is tremendously important for parties that are involved in or contemplating a human rights claim to bear in mind. Even if they are successful, unless they are representing themselves, they will incur substantial legal costs, in addition to the time and stress that litigation involves.
In most cases, the parties will adopt a relatively reasonable approach to litigation, and will not pursue it if a reasonable resolution can be reached. When assessing what is reasonable, they will take into account the potential legal fees that they will incur, as well as the fact that those will not be recoverable.
However, in my humble opinion, our human rights tribunals should be given the power to award costs against parties where their positions were entirely indefensible.
This would apply when there is a frivolous or vexatious claim, and equally when there is a frivolous or indefensible response. In other words, if any party commences or prolongs litigation, when they clearly have no legitimate chance of succeeding, then there should be an order made that they compensate the other party for their wasted legal costs.
There have been efforts to implement this in Ontario, including a private member’s bill that was pursued a few years ago. Unfortunately, that bill died and there is nothing currently in the works that I am aware of. As a result, parties should bear in mind that unlike civil claims, human rights claims have no cost consequences. And as such, there is no possibility that they will recover the legal fees that they spend.
Obviously, when contemplating a claim, pursuing a claim, addressing the threat of a claim, or defending a claim, parties should bear this issue in mind. It is a pyrrhic victory indeed when a plaintiff obtains a judgment for $20,000 but spends $25,000 to get it.
How We Can Help
When we work with our clients, be they employee or employer, we encourage them to carry out a cost/benefit analysis at every stage of litigation. They must consider all potential costs, including money, time, delay, stress, and diverted resources credit. Ultimately, they will reach a business decision as to how to best proceed with respect to their claim or defense. Our job is to provide them with a realistic assessment of the strength of their case, as well as a realistic estimate of the costs that they might incur.
So if you are considering a claim, or may have to defend one, please reach out to us before you do anything else.