British Columbia (Minister of Forests) v. Okanagan Indian Band

British Columbia (Minister of Forests) v. Okanagan Indian Band
Collection
Supreme Court Judgments
Date
2003-12-12
Neutral citation
2003 SCC 71
Report
[2003] 3 SCR 371
Case number
28981, 28988
Judges
McLachlin, Beverley; Gonthier, Charles Doherty; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis; Deschamps, Marie
On appeal from
British Columbia
Subjects
Civil procedure
Notes
SCC Case Information: 28988, 28981
Decision Content
British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371, 2003 SCC 71
Her Majesty The Queen in Right of the Province of British Columbia,
as represented by the Minister of Forests Appellant
v.
Chief Dan Wilson, in his personal capacity and as representative
of the Okanagan Indian Band, and all other persons engaged
in the cutting, damaging or destroying of Crown Timber at
Timber Sale Licence A57614 Respondents
and
Attorney General of Canada, Attorney General of Ontario,
Attorney General of Quebec, Attorney General of New Brunswick,
Attorney General of British Columbia, Attorney General of Alberta, the
Songhees Indian Band, the T’Sou‑ke First Nation, the Nanoose First Nation
and the Beecher Bay Indian Band (collectively the “Te’mexw Nations”), and
Chief Roger William, on his own behalf and on behalf of all
other members of the Xeni Gwet’in First Nations government
and on behalf of all other members of the Tsilhqot’in Nation Interveners
and between
Her Majesty The Queen in Right of the Province of British Columbia,
as represented by the Minister of Forests Appellant
v.
Chief Ronnie Jules, in his personal capacity and as representative
of the Adams Lake Indian Band, Chief Stuart Lee, in his personal capacity
and as representative of the Spallumcheen Indian Band, Chief Arthur
Manuel, in his personal capacity and as representative of the Neskonlith
Indian Band, and David Anthony Nordquist, in his personal capacity
and as representative of the Adams Lake Indian Band, the Spallumcheen
Indian Band and the Neskonlith Indian Band, and all other persons
engaged in the cutting, damaging or destroying of Crown Timber at
Timber Sale Licence A38029, Block 2 Respondents
and
Attorney General of Canada, Attorney General of Ontario,
Attorney General of Quebec, Attorney General of New Brunswick,
Attorney General of British Columbia, Attorney General of Alberta, the
Songhees Indian Band, the T’Sou‑ke First Nation, the Nanoose First Nation
and the Beecher Bay Indian Band (collectively the “Te’mexw Nations”), and
Chief Roger William, on his own behalf and on behalf of all other
members of the Xeni Gwet’in First Nations government and on behalf
of all other members of the Tsilhqot’in Nation Interveners
Indexed as: British Columbia (Minister of Forests) v. Okanagan Indian Band
Neutral citation: 2003 SCC 71.
File Nos.: 28988, 28981.
2003: June 9; 2003: December 12.
Present: McLachlin C.J. and Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel and Deschamps JJ.
on appeal from the court of appeal for british columbia
Costs — Interim costs — Principles governing exercise of court’s discretionary power to grant interim costs — Minister of Forests serving Indian Bands with stop-work orders for logging on Crown land without authorization — Bands claiming aboriginal title to lands — Minister applying to have proceedings remitted to trial list — Bands arguing that matter of aboriginal title should not go to trial as they lack financial resources to fund action or in alternative, requesting order that Crown pay interim costs to fund action in advance and in any event of cause — Whether Court of Appeal’s decision to grant interim costs should be upheld — Whether Court of Appeal had sufficient grounds to review exercise of chambers judge’s discretion — Rules of Court, B.C. Reg. 221/90, ss. 52(11)(d), 57(9).
In 1999, members of the four respondent Bands began logging on Crown land in B.C. without authorization under the Forest Practices Code of British Columbia Act. The Minister of Forests served the Bands with stop-work orders under the Code, and commenced proceedings to enforce the orders. The Bands claimed that they had aboriginal title to the lands in question and were entitled to log them. They filed a notice of constitutional question challenging the Code as conflicting with their constitutionally protected aboriginal rights. The Minister then applied to have the proceedings remitted to the trial list instead of being dealt with in a summary manner. The Bands argued that the matter should not go to trial, because they lacked the financial resources to fund a protracted and expensive trial. In the alternative, they argued that the court, in the exercise of its powers to attach conditions to a discretionary order and to make orders as to costs, should order a trial only if it also ordered the Crown to pay their legal fees and disbursements in advance and in any event of the cause. The B.C. Supreme Court held that the case should be remitted to the trial list and declined to order the Minister to pay the Bands’ costs in advance of the trial. The Court of Appeal allowed the Bands’ appeal. The decision to remit the matter of the Bands’ aboriginal rights or title to trial was upheld. The court concluded, however, that although the Bands did not have a constitutional right to legal fees funded by the provincial Crown the court did have a discretionary power to order interim costs. It ordered the Crown to pay such legal costs of the Bands as ordered by the chambers judge from time to time, subject to detailed terms that it imposed so as to encourage the parties to minimize unnecessary steps in the dispute and to resolve as many issues as possible by negotiation.
Held (Iacobucci, Major and Bastarache JJ. dissenting): The appeal should be dismissed.
Per McLachlin C.J. and Gonthier, Binnie, Arbour, LeBel and Deschamps JJ.: The Court of Appeal’s decision to grant interim costs to the Bands should be upheld. The discretionary power to award interim costs in appropriate cases has been recognized in Canada. Concerns about access to justice and the desirability of mitigating severe inequality between litigants feature prominently in the rare cases where such costs are awarded. The power to order interim costs is inherent in the nature of the equitable jurisdiction as to costs, in the exercise of which the court may determine at its discretion when and by whom costs are to be paid. Several conditions must be present for an interim costs order to be granted. The party seeking the order must be impecunious to the extent that, without such an order, that party would be deprived of the opportunity to proceed with the case; the claimant must establish a prima facie case of sufficient merit to warrant pursuit; and there must be special circumstances sufficient to satisfy the court that the case is within the narrow class of cases where this extraordinary exercise of its powers is appropriate.
In public interest litigation special considerations also come into play. Public law cases, as a class, can be distinguished from ordinary civil disputes. They may be viewed as a subcategory where the special circumstances that must be present to justify an award of interim costs are related to the public importance of the questions at issue in the case. It is for the trial court to determine in each instance whether a particular case, which might be classified as special by its very nature as a public interest case, is special enough to rise to the level where the unusual measure of ordering costs would be appropriate. The criteria that must be present to justify an award of interim costs in this kind of case are as follows: the party seeking interim costs genuinely cannot afford to pay for the litigation, and no other realistic option exists for bringing the issues to trial; the claim to be adjudicated is prima facie meritorious; and the issues raised transcend the individual interests of the particular litigant, are of public importance, and have not been resolved in previous cases.
Each of these criteria is met in this case. The Bands are impecunious and cannot proceed to trial without an order for interim costs. The case is of sufficient merit that it should go forward; the issues sought to be raised at trial are of profound importance to the people of B.C., both aboriginal and non‑aboriginal, and their determination would be a major step towards settling the many unresolved problems in the Crown-aboriginal relationship in that province. In short, the circumstances of this case are indeed special, even extreme. The conditions attached to the costs order by the Court of Appeal ensure that the parties will be encouraged to resolve the matter through negotiation, which remains the ultimate route to achieving reconciliation between aboriginal societies and the Crown, and also that there will be no temptation for the Bands to drag out the process unnecessarily and to throw away costs paid by the Crown.
The Court of Appeal had sufficient grounds to review the exercise of discretion by the trial court. Discretionary decisions are not completely insulated from review. An appellate court may and should intervene where it finds that the trial judge has misdirected himself as to the applicable law or made a palpable error in his assessment of the facts. Two errors in particular vitiate the chambers judge’s decision and call for appellate intervention. First, he overemphasized the importance of avoiding any order that involved prejudging the issues and erred when he concluded that his discretion did not extend so far as to empower him to make the order requested. Second, his finding that a contingent fee arrangement might be a viable alternative for funding the litigation does not appear to be supported by any evidence, and the prospect of the Bands’ hiring counsel on a contingency basis seems unrealistic in the particular circumstances of this case.
Per Iacobucci, Major and Bastarache JJ. (dissenting): The chambers judge interpreted the applicable principles correctly and there is no basis for reversing his discretion. Traditionally, costs are awarded after the ultimate trial or appellate decision and almost always to the successful party. However, the common law on interim costs has been more confined and interim costs have been awarded in two circumstances: in marital cases where some liability is presumed and the indemnificatory purpose of the costs power is fulfilled; and in corporate and trust cases where the court grants advanced costs to be paid by the corporation or trust for whose benefit the action is brought. Courts may also award interim costs in child custody cases. The reason for such restrictive use is apparent since awarding costs in advance could be seen as prejudging the merits and the objectivity of the court making such an order will almost automatically be questioned. The awarding of interim costs in the circumstances of this appeal appears as a form of judicially imposed legal aid. Interim costs should not be expanded to engage the court in essentially funding litigation for impecunious parties and ensuring their access to court. The new criteria endorsed by the majority broaden the scope of interim costs to an undesirable extent and are not supported in the case law. Such developments should be initiated by trial courts properly exercising their discretionary power, not the appellate reversal of that discretion. A case must be exceptional in order to attract interim costs; however, the majority accept that most public interest cases would satisfy this criterion and leave to the discretion of the trial judge the decision as to whether the case is “special enough” to warrant an order. The difficulty for the trial judge is that this does not provide any ascertainable standard or direction. Even if such special circumstances were to be considered, there is nothing to distinguish the present aboriginal land claims from any other. Further, one may not presume that the Bands will establish even partial aboriginal title in the cases under appeal. The ratio of the common law dictates the following three guidelines for the discretionary, extraordinary award of interim costs: the party seeking the interim costs cannot afford to fund the litigation, and has no other realistic manner of proceeding with the case; there is a special relationship between the parties such that an award of interim costs or support would be particularly appropriate; and it is presumed that the party seeking interim costs will win some award from the other party. The chambers judge committed no error of law nor a palpable error in his assessment of the facts. Deference should be given to his decision not to exercise his discretion to grant interim costs.
Cases Cited
By LeBel J.
Referred to: Re Regional Municipality of Hamilton-Wentworth and Hamilton-Wentworth Save the Valley Committee, Inc. (1985), 51 O.R. (2d) 23; Ryan v. McGregor (1925), 58 O.L.R. 213; Fellowes, McNeil v. Kansa General International Insurance Co. (1997), 37 O.R. (3d) 464; Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201; Kendall v. Hunt (No. 2) (1979), 16 B.C.L.R. 295; Canadian Newspapers Co. v. Attorney-General of Canada (1986), 32 D.L.R. (4th) 292; Re Lavigne and Ontario Public Service Employees Union (No. 2) (1987), 60 O.R. (2d) 486, rev’d (1989), 67 O.R. (2d) 536, aff’d [1991] 2 S.C.R. 211; Rogers v. Sudbury (Administrator of Ontario Works) (2001), 57 O.R. (3d) 467; B. (R.) v. Children’s Aid Society of Metropolitan Toronto, [1995] 1 S.C.R. 315, aff’g (1992), 10 O.R. (3d) 321, aff’g [1989] O.J. No. 205 (QL); Jones v. Coxeter (1742), 2 Atk. 400, 26 E.R. 642; Organ v. Barnett (1992), 11 O.R. (3d) 210; McDonald v. McDonald (1998), 163 D.L.R. (4th) 527; Woloschuk v. Von Amerongen, [1999] A.J. No. 463 (QL), 1999 ABQB 306; Roberts v. Aasen, [1999] O.J. No. 1969 (QL); Amcan Industries Corp. v. Toronto-Dominion Bank, [1998] O.J. No. 3014 (QL); Turner v. Telecommunication Workers Pension Plan (2001), 197 D.L.R. (4th) 533, 2001 BCCA 76; New Brunswick (Minister of Health and Community Services) v. G. (J.) (1995), 131 D.L.R. (4th) 273, rev’d [1999] 3 S.C.R. 46; Earl v. Wilhelm (2000), 199 Sask. R. 21, 2000 SKCA 68; Benson v. Benson (1994), 120 Sask. R. 17; R. v. Regan, [2002] 1 S.C.R. 297, 2002 SCC 12; Pelech v. Pelech, [1987] 1 S.C.R. 801; Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010.
By Major J. (dissenting)
Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010; R. v. Van der Peet, [1996] 2 S.C.R. 507; McDonald v. McDonald (1998), 163 D.L.R. (4th) 527; Randle v. Randle (1999), 254 A.R. 323, 1999 ABQB 954; Roberts v. Aasen, [1999] O.J. No. 1969 (QL); Watkins v. Olafson, [1989] 2 S.C.R. 750; R. v. Salituro, [1991] 3 S.C.R. 654; Winnipeg Child and Family Services (Northwest Area) v. G. (D.F.), [1997] 3 S.C.R. 925.
Statutes and Regulations Cited
Business Corporations Act, R.S.O. 1990, c. B.16, ss. 248, 249.
Canadian Charter of Rights and Freedoms, s. 15 .
Company Act, R.S.B.C. 1996, c. 62, s. 201.
Constitution Act, 1982, s. 35 .
Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1).
Forest Practices Code of British Columbia Act, R.S.B.C. 1996, c. 159, ss. 96, 123.
Queen’s Bench Rules, Man. Reg. 553/88, r. 49.10.
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rr. 49.10, 57.01(1)(d), (2).
Rules of Court, B.C. Reg. 221/90, rr. 1(12), 37(23) to 37(26), 52(11)(d), 57(9).
Authors Cited
Orkin, Mark M. The Law of Costs, 2nd ed. Aurora, Ont.: Canada Law Book, 1987 (loose-leaf updated November 2002).
APPEAL from a judgment of the British Columbia Court of Appeal (2001), 95 B.C.L.R. (3d) 273, 208 D.L.R. (4th) 301, 161 B.C.A.C. 13, 263 W.A.C. 13, 92 C.R.R. (2d) 319 (sub nom. British Columbia (Ministry of Forests) v. Jules), [2002] 1 C.N.L.R. 57, [2001] B.C.J. No. 2279 (QL), 2001 BCCA 647, allowing in part an appeal from a decision of the British Columbia Supreme Court, [2000] B.C.J. No. 1536 (QL), 2000 BCSC 1135. Appeal dismissed, Iacobucci, Major and Bastarache JJ. dissenting.
Patrick G. Foy, Q.C., and Robert J. C. Deane, for the appellant.
Louise Mandell, Q.C., Michael Jackson, Q.C., Clarine Ostrove and Reidar Mogerman, for the respondents.
Cheryl J. Tobias and Brian McLaughlin, for the intervener the Attorney General of Canada.
Lori R. Sterling and Mark Crow, for the intervener the Attorney General of Ontario.
René Morin, Gilles Laporte and Brigitte Bussières, for the intervener the Attorney General of Quebec.
Written submissions only by Gabriel Bourgeois, Q.C., for the intervener the Attorney General of New Brunswick.
Written submissions only by George H. Copley, Q.C., for the intervener the Attorney General of British Columbia.
Written submissions only by Margaret Unsworth, for the intervener the Attorney General of Alberta.
Robert J. M. Janes and Dominique Nouvet, for the interveners the Songhees Indian Band et al.
Joseph J. Arvay, Q.C., and David M. Robbins, for the intervener Chief Roger William.
The judgment of McLachlin C.J. and Gonthier, Binnie, Arbour, LeBel and Deschamps JJ. was delivered by
LeBel J. —
I. Introduction
1 These two appeals concern the inherent jurisdiction of the courts to grant costs to a litigant, in rare and exceptional circumstances, prior to the final disposition of a case and in any event of the cause (I will refer to a cost award of this nature as “interim costs”). Such a jurisdiction exists in British Columbia. This discretionary power is subject to stringent conditions and to the observance of appropriate procedural controls. In this case, for the reasons which follow, I would uphold the granting of interim costs to the respondents by the British Columbia Court of Appeal, and I would hold that the Court of Appeal had sufficient grounds to review the exercise of discretion by the trial court.
II. Background
2 In the fall of 1999, members of the four respondent Indian bands (the “Bands”) began logging on Crown land in British Columbia without authorization under the Forest Practices Code of British Columbia Act, R.S.B.C. 1996, c. 159 (the “Code”). The Bands’ respective tribal councils had purportedly authorized the harvesting of the timber, which was to be used to construct housing on the Bands’ reserves. The appellant Minister of Forests served the Bands with stop-work orders under the Code, and commenced proceedings to enforce the orders. The Bands claimed that they had aboriginal title to the lands in question and were entitled to log them. They filed a notice of constitutional question challenging ss. 96 and 123 of the Code as conflicting with their constitutionally protected aboriginal rights.
3 The Minister then applied under Rule 52(11)(d) of the Rules of Court of the Supreme Court of British Columbia, B.C. Reg. 221/90, to have the proceedings remitted to the trial list instead of being dealt with in a summary manner. The respondents argued that the matter should not go to trial, because they lacked the financial resources to fund a protracted and expensive trial — which, given the evidentiary challenges of proving a claim of aboriginal title, this would almost undoubtedly be. In the alternative, they argued that the court, in the exercise of its powers to attach conditions to a discretionary order under Rule 52(11)(d) and to make orders as to costs pursuant to Rule 57(9), should order a trial only if it also ordered the Crown to pay their legal fees and disbursements in advance and in any event of the cause. In support of this position, they raised constitutional arguments on three grounds: a general right of access to justice that is implicit in the Canadian Charter of Rights and Freedoms and flows from the primacy of the rule of law; the protection of aboriginal rights, as affirmed by s. 35 of the Constitution Act, 1982 ; and equality rights under s. 15 of the Charter .
4 The respondents filed affidavit and documentary evidence in support of their claims of aboriginal title and rights. They also submitted evidence demonstrating that it was impossible for them to fund the litigation themselves. The evidence indicated that the Bands were all in extremely difficult financial situations. The chiefs deposed that their communities face grave social problems, including high unemployment rates, lack of housing, inadequate infrastructure, and lack of access to education. Many members of the respondent Bands who live off-reserve would like to return to their communities, but are unable to do so because there are not enough jobs and homes even for those who live on the reserves now. The Bands have been forced to run deficits to finance their day-to-day operations. The chiefs of the Spallumcheen and Neskonlith Bands deposed that they are close to having outside management of their finances imposed by the Department of Indian and Northern Affairs because their working capital deficits are so high.
5 The Bands’ counsel estimated that the cost of a full trial would be $814,010. The Bands say that they had no way to raise this much money; and that even if they did, there are many more pressing needs which would have to take priority over funding litigation. One of the most urgent needs is new housing — the very purpose for which, they say, they want to harvest timber from the land to which they claim title.
III. Relevant Legislative Provisions
6 Supreme Court of British Columbia Rules of Court, B.C. Reg. 221/90
1(12) When making an order under these rules the court may impose terms and conditions and give directions as it thinks just.
52(11) On an application the court may
(d) order a trial of the proceeding, either generally or on an issue, and order pleadings to be filed, and may give directions for the conduct of the trial and of pre‑trial proceedings, and for the disposition of the application.
57(9) . . . costs of and incidental to a proceeding shall follow the event unless the court otherwise orders.
IV. Judicial History
A. British Columbia Supreme Court, [2000] B.C.J. No. 1536 (QL), 2000 BCSC 1135
7 Sigurdson J. held that the case could not be decided on the basis of documentary and affidavit evidence alone, and should therefore be remitted to the trial list. The evidence submitted by the Bands of their historical connection to the land was not sufficient in itself to dispose of the issue. Proving the Bands’ aboriginal rights claims, which were contested by the Crown, would require historical, anthropological and archaeological evidence to be given by live witnesses and subjected to the detailed and rigorous testing of the trial process. The just resolution of the dispute required a trial and pleadings.
8 Sigurdson J. went on to consider whether he should impose a condition that the Minister pay the Bands’ legal fees and disbursements. He began with the question of whether the court retained a general jurisdiction to award interim costs in a proceeding. He noted that costs usually follow the event and are awarded at the conclusion of the proceedings. Referring to a line of Ontario cases where a narrow jurisdiction to award interim costs has been recognized, Sigurdson J. held that such a discretion also existed in British Columbia in exceptional circumstances. He noted that he was unaware of any cases where substantial amounts had been awarded prior to trial where a liability or right was seriously in issue.
9 Turning to the Bands’ argument that constitutional norms applied to the exercise of his discretion over costs, Sigurdson J. held that those norms did not require an order of interim costs to be made in the Bands’ favour. He acknowledged that the Bands would need to retain experienced counsel and experts, and that a trial would be complex and expensive. He also recognized that the Bands’ poverty would make it difficult for them to put their case forward. In his view, however, these obstacles resulted from the nature of the case and from the Bands’ financial circumstances, not from any interference with their constitutional rights. The Bands’ s. 35 argument failed, he held, because there were no specific circumstances giving rise to a fiduciary obligation on the part of the Crown to negotiate with the Bands or to fund the litigation of their land claim.
10 Sigurdson J. declined to order the Minister to pay the Bands’ costs in advance of the trial. He found that his jurisdiction to make such an order was very narrow and was limited by the principle that he could not prejudge the outcome of the case. In this case, liability was still in issue, and Sigurdson J. held that ordering the payment of costs in advance would involve prejudging the case on the merits. For this reason, he was of the view that he was precluded from making such an order. Sigurdson J. added a recommendation that the federal and provincial Crown consider providing funding to ensure that the cases, which had elements of test cases, would be properly resolved at trial. He also suggested that the litigation might be able to proceed if the Bands could work out a contingent fee arrangement with counsel.
B. British Columbia Court of Appeal (2001), 95 B.C.L.R. (3d) 273, 2001 BCCA 647
11 Newbury J.A., writing for a unanimous panel, allowed the Bands’ appeal of Sigurdson J.’s decision.
12 At the outset, Newbury J.A. noted that the Bands’ claims, if they went to trial, would be the first to try aboriginal claims to title and other rights in respect of logging in British Columbia. She also summarized some of the affidavit evidence setting out the dire financial circumstances of the Bands.
13 Newbury J.A. upheld the chambers judge’s decision to remit the matter of the Bands’ aboriginal rights or title to trial. She agreed with him that the just determination of these issues required a trial. This holding was not raised on appeal to this Court.
14 On the question of funding the litigation, Newbury J.A. distinguished between a constitutional right to full funding of legal fees and disbursements, on the one hand, and on the other, the court’s discretion to make orders as to “costs” as that term is used in the rules of court and in general legal parlance — meaning a payment to offset legal expenses, usually in an amount set by statutory guidelines, rather than payment of the actual amount owed by the client to his or her solicitor.
15 As far as a constitutional right to funding of the Bands’ legal expenditures was concerned, Newbury J.A. substantially agreed with the reasons of the chambers judge. She held that the principle of access to justice did not extend so far as to oblige the government to fund litigants who could not afford to pay for legal representation in a civil suit. She also agreed with Sigurdson J. that s. 35 of the Constitution Act, 1982 did not place an affirmative obligation on the government to provide funding for legal fees of an aboriginal band attempting to prove asserted aboriginal rights. Nothing in the specific circumstances of this case gave rise to a fiduciary expectation on the Bands’ part that their legal fees would be funded. (She did not address the Bands’ s. 15 arguments, which were not raised on appeal.) Newbury J.A. concluded that the Bands did not have a constitutional right to legal fees funded by the provincial Crown.
16 Newbury J.A. came to a different conclusion, however, on the matter of the court’s discretion to order interim costs in favour of the Bands. She agreed with Sigurdson J. that this discretion existed, and that it was narrow in scope and restricted to narrow and exceptional circumstances. In her view, however, the circumstances of this case were indeed exceptional. Newbury J.A. held that the chambers judge had placed too much emphasis on concerns about prejudging the outcome, which in her view were diminished in light of the special circumstances of the case and the public interest in a proper resolution of the issues. She held that constitutional principles and the unique nature of the relationship between the Crown and aboriginal peoples were background factors that should inform the exercise of the court’s discretion to order costs. Newbury J.A. held that the chambers judge had erred in failing to recognize that the case involved exceptional and unique circumstances which outweighed concerns about prejudging the outcome of the case.
17 Newbury J.A. held that, although the court had no discretion to order full funding of the Bands’ case by the Crown, the chambers judge did have a discretionary power to order interim costs. She held that such an order should be made with conditions designed to provide concrete assistance to the Bands without exposing the Minister to unreasonable or excessive costs. She ordered the Crown to pay such legal costs of the Bands as ordered by the chambers judge from time to time, subject to detailed terms that she imposed so as to encourage the parties to minimize unnecessary steps in the dispute and to resolve as many issues as possible by negotiation. These terms, as found in the Court of Appeal Order dated November 5, 2001, are best stated in full:
AND THIS COURT FURTHER ORDERS that the Crown, in any event of the cause, pay such legal costs of the Bands, as that term is used and as the Chambers judge orders from time to time in accordance with the following:
(a) Costs, as is referenced in paragraph [10] of the Reasons for Judgment;
(b) Unless the Chambers judge concludes that special costs are warranted in this case, costs are to be calculated on the appropriate scale in light of the complexity and difficulty of the litigation;
(c) Counsel are to consider whether costs could be saved by trying one of the four cases rather than all four at the same time. If counsel are unable to agree on that issue, they should seek directions from the Chambers judge. Counsel are also to use all other reasonable measures to minimize costs, and the Chambers judge may impose restrictions for this purpose;
(d) The Province and the Bands are to attempt to agree on a procedure whereby the Bands upon incurring taxable costs and disbursements from time to time up to the end of the trial, will so advise the respondent, and provide such other ‘backup’ material as the Chambers judge may order. Such costs would be paid by the respondent within a given time-frame, unless the Province objects, in which case it shall refer the matter to the Chambers judge, who may order the taxation of the bill in the ordinary way;
(e) If counsel are unable to agree on such procedures, the matter shall be taken back to the Chambers judge, who shall make directions in accordance with the spirit of these Reasons.
V. Issues
18 This case raises two issues: first, the nature of the court’s jurisdiction in British Columbia to grant costs on an interim basis and the principles that govern its exercise; and second, appellate review of the trial court’s discretion as to costs. The issue of a constitutional right to funding does not arise, as it was not relied on by the respondents in this appeal.
VI. Analysis
A. The Court’s Discretionary Power to Grant Interim Costs
(1) Traditional Costs Principles — Indemnifying the Successful Party
19 The jurisdiction of courts to order costs of a proceeding is a venerable one. The English common law courts did not have inherent jurisdiction over costs, but beginning in the late 13th century they were given the power by statute to order costs in favour of a successful party. Courts of equity had an entirely discretionary jurisdiction to order costs according to the dictates of conscience (see M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at p. 1-1). In the modern Canadian legal system, this equitable and discretionary power survives, and is recognized by the various provincial statutes and rules of civil procedure which make costs a matter for the court’s discretion.
20 In the usual case, costs are awarded to the prevailing party after judgment has been given. The standard characteristics of costs awards were summarized by the Divisional Court of the Ontario High Court of Justice in Re Regional Municipality of Hamilton-Wentworth and Hamilton-Wentworth Save the Valley Committee, Inc. (1985), 51 O.R. (2d) 23, at p. 32, as follows:
(1) They are an award to be made in favour of a successful or deserving litigant, payable by the loser.
(2) Of necessity, the award must await the conclusion of the proceeding, as success or entitlement cannot be determined before that time.
(3) They are payable by way of indemnity for allowable expenses and services incurred relevant to the case or proceeding.
(4) They are not payable for the purpose of assuring participation in the proceedings. [Emphasis in original.]
21 The characteristics listed by the court reflect the traditional purpose of an award of costs: to indemnify the successful party in respect of the expenses sustained either defending a claim that in the end proved unfounded (if the successful party was the defendant), or in pursuing a valid legal right (if the plaintiff prevailed). Costs awards were described in Ryan v. McGregor (1925), 58 O.L.R. 213 (App. Div.), at p. 216, as being “in the nature of damages awarded to the successful litigant against the unsuccessful, and by way of compensation for the expense to which he has been put by the suit improperly brought”.
(2) Costs as an Instrument of Policy
22 These background principles continue to govern the law of costs in cases where there are no special factors that would warrant a departure from them. The power to order costs is discretionary, but it is a discretion that must be exercised judicially, and accordingly the ordinary rules of costs should be followed unless the circumstances justify a different approach. For some time, however, courts have recognized that indemnity to the successful party is not the sole purpose, and in some cases not even the primary purpose, of a costs award. Orkin, supra, at p. 2-24.2, has remarked that:
The principle of indemnification, while paramount, is not the only consideration when the court is called on to make an order of costs; indeed, the principle has been called “outdated” since other functions may be served by a costs order, for example to encourage settlement, to prevent frivolous or vexations [sic] litigation and to discourage unnecessary steps.
23 The indemnification principle was referred to as “outdated” in Fellowes, McNeil v. Kansa General International Insurance Co. (1997), 37 O.R. (3d) 464 (Gen. Div.), at p. 475. In this case the successful party was a law firm, one of whose partners had acted on its behalf. Traditionally, courts applying the principle of indemnification would allow an unrepresented litigant to tax disbursements only and not counsel fees, because the litigant could not be indemnified for counsel fees it had not paid. Macdonald J. held that the principle of indemnity remained a paramount consideration in costs matters generally, but was “outdated” in its application to a case of this nature. The court should also use costs awards so as to encourage settlement, to deter frivolous actions and defences, and to discourage unnecessary steps in the litigation. These purposes could be served by ordering costs in favour of a litigant who might not be entitled to them on the view that costs should be awarded purely for indemnification of the successful party.
24 Similarly, in Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201, the British Columbia Court of Appeal stated at para. 28 that “the view that costs are awarded solely to indemnify the successful litigant for legal fees and disbursements incurred is now outdated”. The court held that self-represented lay litigants should be allowed to tax legal fees, overruling its earlier decision in Kendall v. Hunt (No. 2) (1979), 16 B.C.L.R. 295. This change in the common law was described by the court as an incremental one “when viewed in the larger context of the trend towards awarding costs to encourage or deter certain types of conduct, and not merely to indemnify the successful litigant” (para. 44).
25 As the Fellowes and Skidmore cases illustrate, modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer; this policy has been codified in the rules of court of many provinces (see, e.g., Supreme Court of British Columbia Rules of Court, Rule 37(23) to 37(26); Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49.10; Manitoba Queen’s Bench Rules, Man. Reg. 553/88, Rule 49.10). Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.
26 Indeed, the traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner’s litigation expenses to the loser rather than leaving each party’s expenses where they fall (as is done in jurisdictions without costs rules), they act as a disincentive to those who might be tempted to harass others with meritless claims. And because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court’s concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs.
(3) Public Interest Litigation and Access to Justice
27 Another consideration relevant to the application of costs rules is access to justice. This factor has increased in importance as litigation over matters of public interest has become more common, especially since the advent of the Charter . In special cases where individual litigants of limited means seek to enforce their constitutional rights, courts often exercise their discretion on costs so as to avoid the harshness that might result from adherence to the traditional principles. This helps to ensure that ordinary citizens have access to the justice system when they seek to resolve matters of consequence to the community as a whole.
28 Courts have referred to the importance of this objective on numerous occasions. In Canadian Newspapers Co. v. Attorney-General of Canada (1986), 32 D.L.R. (4th) 292 (Ont. H.C.J.), Osler J. opined that “it is desirable that bona fide challenge is not to be discouraged by the necessity for the applicant to bear the entire burden” (pp. 305-6), while at the same time cautioning that “the Crown should not be treated as an unlimited source of funds with the result that marginal applications would be encouraged” (p. 306). In Re Lavigne and Ontario Public Service Employees Union (No. 2) (1987), 60 O.R. (2d) 486 (H.C.J.), White J. held that “it is desirable that Charter litigation not be beyond the reach of the citizen of ordinary means” (p. 526). He awarded costs to the successful Charter applicant in spite of the fact that his representation had been paid for by a third-party organization (so that he would not, on the traditional approach, have been entitled to any indemnity). This case was overturned on the merits on appeal (Lavigne v. O.P.S.E.U. (1989), 67 O.R. (2d) 536 (C.A.), aff’d [1991] 2 S.C.R. 211), but neither the Ontario Court of Appeal nor this Court expressed any disapproval of White J.’s remarks on costs. Referring to both Canadian Newspapers and Lavigne in Rogers v. Sudbury (Administrator of Ontario Works) (2001), 57 O.R. (3d) 467 (S.C.J.), Epstein J. concluded at para. 19 that “costs c