June 19, 2011

Tribunal jurisdiction to award costs in discipline proceedings

Administrative Law
Professional Regulation

Hearings are expensive processes for all parties. Respondents of course bear the expense of legal fees associated with their defence. Regulatory bodies wear two hats and therefore bear the double-whammy of both prosecution expenses, and tribunal expenses in the form of independent legal counsel expenses, and other panel expenses like per diem fees or reimbursements for accommodations or travel.

As a result, “costs” awards are a tempting way for regulatory bodies to recover some or all of their expenses. While hearing expenses are, from one perspective, simply a cost of a body being tasked with administering justice, hearing expenses can also seem, from another perspective, a “needless” expense which relates directly to a respondent being obstinate about his or her misconduct. From this perspective, the bigger the costs award, the better. Of course, the opposite can also seem true from a defence perspective, where for example, a hearing is the result of a regulator insisting on overreaching allegations which have prevented a matter from resolving consensually, thus warranting substantial costs against a regulatory body.

The concept of costs involves a number of policy considerations. For example, the very concept of costs (insofar as it applies, since it is not universal to every adjudicative system) implicitly incorporates an element of “fault” to be revealed in hindsight. Thus a party who loses is said to be responsible for costs in part because that party “should have known better” and should have conceded before the hearing. This view can be inviting where the outcome was one that could be readily predicted. It is less inviting where a matter involves a genuine controversy. One primary purpose of costs is, however, to provide a disincentive to litigation, at least in the realm of civil disputes.

The appropriateness of costs can depend on one’s view of the nature of discipline proceedings. Certainly, professional regulatory hearings have “civil” aspects, and by analogy one can say that a costs regime similar to the one applied by civil courts is appropriate. But professional regulatory hearings also bear some similarity to criminal proceedings as well: regulatory bodies are statutory bodies that perform a governmental function and are subject to the Charter of Rights and Freedoms; they operate in the public interest; and they owe the same disclosure obligations of the Crown under Stinchcombe. From this perspective, respondents are “like” accused persons, who are always entitled to require the state to prove an accusation. Accused persons are presumed innocent, and do not pay costs associated with them asserting their right to a trial.

Furthermore, some systems exclude costs awards altogether, because costs have an impact on access-to-justice. The threat of liability for costs can prevent parties from bringing claims or advancing defences. For this reason, a regime can limit costs (meaning they intentionally fall well short of actual costs), or they might not be payable at all. For example, the impact of costs on access-to-justice explains why a review body like the Health Professions Review Board does not have costs “follow the event,” such that it will award costs only “in exceptional circumstances” such where a review is commenced in “bad faith” or “for an improper purpose”. (2009-HPA-0001(a) etc., March 17, 2010) Similarly, courts involving “small” amounts (like small claims courts, which currently address disputes involving $25,000 or less) often do not provide for costs awards.

In this context, statutes can empower regulatory panels to award costs, and to create systems of costs awards. Courts have, however, deemed references to “costs” in statutes to involve some built-in limitations, these being the principles that courts will apply when awarding and quantifying costs in civil proceedings, unless a statute says otherwise:  see Roberts v. College of Dental Surgeons (British Columbia) (1999), 63 B.C.L.R. (3d) 116 (C.A.) and Shpak v. Institute of Chartered Accountants of British Columbia, 2003 BCCA 149.

Here are some highlights on the principles that BC courts may “read in” to costs systems:

1. When a statute refers to “costs,” then unless it says otherwise, this means the costs provisions of the Supreme Court. A power to award costs means “the usual power exercisable by the courts with respect to costs” under what is now Supreme Court Civil Rule 14-1 (Shpak at ¶56)

2. The Supreme Court recognizes two kinds of costs:

a. party-and-party costs, sometimes called ordinary costs, where costs are established by “units” of costs for each stage of a proceeding, such that costs awards will ultimately fall well short of actual costs; and

b. “special” costs, meaning reasonable costs, always reserved for parties who misconduct themselves during a proceeding.

Costs should not exceed the court tariff except where reprehensible conduct warrants an award of special costs. Therefore, courts may scrutinize costs awards that come close to full indemnity.

3. Costs are two-way costs, meaning that if a regulatory body should fail to make out a case, a panel may award costs against the prosecuting body.

4. Costs usually “follow the event,” meaning that costs will normally be awarded against an unsuccessful party. This may, however, depend on the regime. (For example, the BC College of Teachers involves a one-way costs system – costs can be awarded only against a respondent – but perhaps as a result, a practice has evolved such that historically, panels have not awarded costs against respondent teachers except to sanction conduct during a proceeding that is deserving of rebuke.)

5. A decision-maker may account for “divided success” where each party wins some but not all issues. For example, if a regulatory body “wins” one allegation, but fails to make out another allegation – meaning the respondent was successful on that point – the panel may award costs to each party for its successful claims (with the amounts being “set-off” against the costs of the other party), or it may decline to award costs altogether, on the basis the parties should “bear their own costs”.

6. Costs means costs between the parties, and not costs associated with the panel itself. Accordingly, regulators should consider the legality of any bylaw provisions that purport to authorize costs awards that include panel or tribunal expenses, as distinct from prosecution expenses.

For example, in Shpak, the court rejected the legality of a bylaw which purported to authorize panel-lawyer costs: “[64] … The costs of counsel to the panel have no counterpart under Rule 57. It is not a party and party cost as contemplated by that Rule. Rather, it is a cost of the tribunal. … [65] … to the extent that By-law 860 clearly contemplates such an award, it suffers from the same problem in this respect as Article 16.22(g) in Roberts – it exceeds the jurisdiction provided under the Act for an award of costs.” The court emphasized that a bylaw cannot exceeds the authority of the constituent statute.

That having been said, the Supreme Court does provide for court fees (Appendix C of the Supreme Court Civil Rules, passed under the Court Rules Act) which are borne by the parties when they take particular steps. An important feature of these fees is that they are fixed sums known to litigants in advance (as distinct, for example, from tribunal expenses fixed at the discretion of a panel or otherwise knowable to a respondent only after a hearing has concluded). If a statute allows for tribunal costs, a regime of fixed tribunal fees in advance has significant merits over a regime that allows – and effectively requires – a losing respondent to dredge through the actual reimbursable disbursements of panellists, for example, to ensure reasonableness.