I. Introduction
and Background
[1]
These
reasons deal with a motion for costs made by the applicants which arises in the
following context.
[2]
On
May 10, 2010, this Court approved a settlement agreement dated the same day
between Mohawk Council of Akwesasne (MCA) on its own behalf and also on behalf
of the Mohawks of Akwesasne including the Elders named in the style of cause
(the applicants) and the Minister of Human Resources and Social Development (the
Settlement Agreement)
[3]
The
Settlement Agreement resolved, on terms and conditions, an application for
judicial review filed in this Court by the applicants on April 1, 2008, in
which they sought a number of declarations in regard to certain alleged actions
by officials of Service Canada, a unit of Human Resources and Social
Development Canada (HRSDC) related to its investigation into the eligibility
and entitlement of some residents of the Quebec and Ontario portions of the
Akwesasne Reserve to receive benefits under the Old Age Security Act,
R.S.C. 1985, c. O-9
[4]
After
the filing of the application, the parties quickly agreed to case management
and judicial mediation; further steps in the judicial review proceeding were
suspended until further order of the Court.
[5]
In
the Fall of 2008, when the main elements of the Settlement Agreement were
agreed to in principle but before the text of the agreement had been settled and
the necessary approvals and authorisations were obtained, on the one hand, by
the MCA after appropriate community consultations and, on the other hand, by
Service Canada from senior officials of the Government of Canada, the issue of
costs payable to the applicants was raised. The respondent was not agreeable to
negotiate the issue of such costs. It was agreed at paragraph 34 of the
Settlement Agreement “that the payment of costs shall be determined by this
Court acting as an arbitrator based upon written submissions filed with the
Court, which determination shall be binding upon the parties and not subject to
appeal.”
II. Applicable legal principles
[6]
As
noted, the Settlement Agreement provides that the payment of costs shall be
determined by the undersigned who had been appointed Case Management Judge and
conducted the mediation pursuant to the Dispute Resolution Services provided
for in Rules 386 to 389 of the Federal Courts Rules (the Rules). The
clear intent of the parties is that any award of costs shall be governed by the
principles relating to costs set out in the Rules and the applicable
jurisprudence derived therefrom.
[7]
The
fundamental principle relating to costs is contained in Rule 400 which confers
on the Court full discretionary power over the amount and allocation of costs
and the determination of by whom they are to be paid. Subsection 400(3) of the
Rules sets out a number of factors the Court may consider in the exercise of
its discretion. Two important factors are (1) the result of the proceeding
based upon the underlying principle that costs normally follow the event and (2)
any written offer to settle made in accordance with Rules 419 to 421 whose
purpose is to induce settlements, a purpose which Rule 387 also promotes
through a dispute resolution conference. Needless to say, the Court’s
discretion must be exercised judicially, that is, in accordance with proper
principles.
[8]
The
jurisprudence of this Court supports the proposition that costs may be awarded
after a proceeding has been settled but where the settlement did not address
the issue of costs. Justice Rouleau in RCP Inc v. Minister of National
Revenue, [1986] 1 F.C. 485, found on the facts of the case, “equity would
dictate the applicant be awarded its costs” because RCP Inc., the applicant,
obtained the relief it sought in its action in the form of a settlement rather
than by judgment of the Court.
[9]
In
recent years, Prothonotary Lafrenière had the opportunity to decide issues of
costs in relation to dispute resolution and settlements. Those cases are DS-Max
Canada Inc. v. Nu-Life Inc. , 2005 FC 25 (DS-Max) and Randall v.
Caldwell First Nation of Point Pelee, 2006 FC 1054 (Randall).
[10]
In
DES-Max, Prothonotary Lafrenière refused to award costs to the defendant in a
case where a one-day mediation session had failed and where the plaintiff
subsequently discontinued his action. He wrote the following at paragraph 18 of
his reasons.
18. I am not prepared to grant any costs
to the Defendants for the mediation session conducted on November 24, 2003. Parties
should be encouraged to resort to less costly and non-confrontational ways to
resolve disputes, and generally should not be penalized by an award of costs in
the event the mediation fails. Each party should therefore bear their own
costs for the dispute resolution conference.
(My emphasis).
[11]
In
Randall, Prothonotary Lafrenière this time was dealing with a case where
mediation led to a settlement but where the parties were unable to agree on the
issue of costs reserving the right to bring a motion for costs. The defendants
brought such a motion claiming (1) it was the successful party; (2) the claimants
were vexatious and unreasonable in the manner in which they pursued the action
thereby requiring the Band Council to incur undue costs; (3) the claimants’
claims were unfocused, broad and chaotic; and (4) their allegations were an
abusive, scandalous personal attack on Band Council members. In sum, the Band
Council claimed the claimants’ conduct should be sanctioned by a substantial
award of costs. The Prothonotary declined to make such award.
[12]
From
the Prothonotary’s reasons for order, I derive the following propositions:
(1)
The defendants have the onus to establish there was a sufficient basis
for the Court to conclude an exercise of its discretion to award costs is
warranted (paragraph 13)
(2) Notwithstanding
the Band Council’s claim that it would have prevailed had the proceeding gone
to hearing, the fact was the proceeding was settled by the parties “without any
concessions having been made by the parties”. In those circumstances and
without a hearing on the merits he was of the view “success is an illusive
concept and capable of being measured quite differently by the parties.”
(paragraph 15)
(3) The
Minutes of Settlement “cannot be construed as evidence of an admission or
concession of liability for costs or wrongdoing by the claimants.” (paragraph
15.
(4) The
RCP case decided by Justice Rouleau does not support the Band Council’s claim
for costs. That case had no application because it was a case where the
applicant had obtained the relief sought in the form of a settlement which was
not the situation before him since the claimants had not conceded the relief
claimed by the defendants. The Court cannot speculate as to the likely outcome
in the circumstances of this case. (paragraph 16)
(5) However,
costs can be awarded on the basis of the conduct of the parties during the
course of the litigation such as: (1) whether it was reasonable for a party to
raise, pursue or contest a particular allegation or issue; (2) whether a party
properly pursued or defended its case or a particular allegation or issue; (3)
whether a party exaggerated its claim or raised a baseless defence; and (4)
whether a party properly conceded issues or abandoned allegations during
discoveries. (paragraph 18)
[13]
Concluding
on the propositions derived from Randall, I cite directly paragraphs 21 and 22
from Prothonotary’s reasons:
[21] The Court must also
be mindful about the chilling effect of awarding costs against a party after
the conclusion of a mediation. It is now widely accepted that dispute
resolution conferences have a significant role to play in the litigation
process. A mediated settlement can produce solutions that exceed those
available through the courts. Its success is contingent, however, upon the
parties buying in to the process.
[22] The litigation between
the Claimants and the Band Council brought a number of festering issues to a
head, and resulted in negotiated settlement that will no doubt contribute to a
better environment and understanding in the community, to the credit of all parties.
(My emphasis)
[14]
Finally,
the comments made by Prothonotary Lafrenière about costs and settlement
resonate in the jurisprudence of other courts. I cite paragraph 19 of the
supplementary reasons of Justice R. A. Blair (then a judge of the Commercial Court – Ontario, Court of
Justice, General Division) in Naneff v. Con-crete Holdings Ltd. [1993]
O.J. No. 1756:
19. I do so principally for the
following reason. The parties engaged in a lengthy mediation process before
Farley J. They made a genuine effort to settle. They are to be commended for
this effort withstanding that, in the end, it was unsuccessful. In my view
the costs of mediation process – which is a voluntary effort to find a suitable
out-of-court resolution – should be borne equally by the parties engaging in
it. Otherwise, parties will be discouraged from engaging in what can in many
instances be a fruitful exercise leading to a self made result, for fear that
at the end of the day, if it is not successful and the proceedings are consequently
lengthened, they will bear more costs. (My emphasis)
III. The Submissions
(A) By the
applicants
[15]
The
applicants made two costs submissions to this Court: (1) an original cost submission
dated September 23, 2009 and (2) a revised costs submission dated January 27,
2010.
[16]
For
the purposes of this decision, I will merge the two submissions since the
revised submission essentially updates costs and expenses incurred by the MCA
in the mediation process.
[17]
In
the original submission, the applicants sought costs in an amount representing
less than one half of the legal fees paid to legal counsel as of September 2009
which amount, it was stated, excluded substantial internal expenses incurred by
the MCA and its staff during the mediation and other related expenses. The
applicants trace the history of its application to the Federal Court and of the
mediation which may be summarized briefly as follows:
(1) Service Canada’s
investigation into the eligibility and entitlement to old age benefits first
began in 2006 with the beneficiaries of such benefits residing in the Quebec portion of the Akwesasne
Reserve and continued in the Spring of the following year with residents in the
Ontario portion of that Reserve.
(2) The investigation
by Service Canada produced conflicts, misunderstandings, allegations of
investigative improprieties and some benefits suspensions. As a result protests
were lodged and meetings held with the Minister and departmental officials but
to no avail causing the application to be launched in this Court.
[18]
The
applicants detail the extensive history of dispute resolution meetings in Ottawa and on the
Akwesasne Reserve coupled with the even more numerous telephone conference
calls.
[19]
In
their revised submissions, the applicants provide an update to the judicial
mediation meetings and telephone conference calls up to January 19, 2010 when
the respondent’s legal counsel advised the respondent had obtained the
necessary authorisations to enter into the Settlement Agreement.
[20]
In
summary form, the applicants’ justification for the costs award is based on the
following factors:
(1) The expenses which
the MCA incurred would not have been incurred if Service Canada had conducted
the investigation, particularly the Quebec one, in a culturally sensitive and
professional manner and had not pressured the Elders in a number of
inappropriate ways especially threatening retaliation to obtain their consent for
disputed authorization forms for the purpose of seeking income information from
the U.S. Social Security Administration.
(2) MCA’s expenses
incurred would have been avoided if Service Canada had been more proactive with
the Elders and if the Minister and the department officials had been more
attuned to MCA’s protests about the investigations.
(3) MCA’s expenses
would have not been on the scale they were if the respondent had been more
receptive to initial settlement offers put forward by the MCA and its legal
team early in the mediation or if the respondent had not delayed putting forth
until November 17, 2008 a first proposal which, in the applicants’ view, was
flawed and rejected. Furthermore, the applicants had to wait until May 20, 2009
for the respondent’s revised proposal.
(4) The MCA’s expenses
would have been reduced if Service Canada and the HRDSC had been more efficient
in responding to questions raised by the MCA and its legal counsel during the
mediation process or had not unduly delayed processing undue hardship
applications, revised consent forms and the like. Such delays were prejudicial
to the Elders particularly those of advanced age, a few of whom passed away
before the settlement was completed. The applicants also say the respondent’s
process to receive approval to sign the Settlement Agreement was extremely
slow.
(5) Finally, counsel
for the applicants submits that costs are also meant to equalize the parties,
especially in situations where one has an advantage over the other in respect
to resources. He submits that in negotiated settlements, the weaker party with
limited resources should be compensated. He further argues that the case
involved complex issues and facts which required the participation of a minimum
of two lawyers and a considerable amount of time consulting with clients,
working on and responding to proposals for settlement and attending dispute
resolution meetings.
(B)
By the respondent
[21]
Counsel
for the respondent also made two submissions, the first on September 29, 2009
in response to the applicants’ original submission and the other on February
11, 2010 replying to the applicants updated submission for costs. I summarize the
respondent’s position as follows:
(1) Counsel for the
respondent recognizes the payment of costs in this matter is in the discretion
of the Court but that discretion ought to be exercised with caution in this
case.
(2) Each party should
bear its own costs, a submission made in the spirit of reconciliation sought by
all parties and in accordance with a fundamental principle of mediation which,
in this case, is the jointly negotiated resolution of the issues between the
parties.
(3) The resolution of
the issues in this mediation relate to the Old Age Security Act (the
OAS) and “thus the litigation is in principle not an aboriginal matter where
consideration might be given to a perceived standard that the Crown pay the
costs of aboriginal litigants.”
(4) There is nothing in
the conduct of the Crown in the initiation of the investigation, its conduct or
its participation in the mediation that would justify a cost award against the
Crown; there are no indicia of bad faith, undue delay or failure to consider
the views of the MCA.
(5) Service Canada had
a statutory duty under the OAS to initiate the investigation in the
circumstances. In fact, counsel says Service Canada’s investigation was
initially supported by the Chiefs of the St. Regis portion of the Reserve.
(6) The investigation
in the Quebec portion showed there were
considerable problems in respect of entitlement particularly in relation to
eligibility for the Guarantee Income Supplement (the GIS).
(7) The investigation
also revealed problems with overpayments connected to incorrect reporting of
residency histories and taxable income.
(8) The problems
identified through the investigation had to be addressed and resolved as a
matter of statutory obligation. Compliance had to be restored and considerable
efforts were undertaken in this direction with the Mohawk Chiefs and the Elders
through information sessions not the least of which were enhanced through the
Court’s supervised mediation in which the respondent participated fully with
several of its senior staff present at all times.
(9) The Settlement
Agreement is based upon adherence with the provisions of the OAS. Recognizing
that this statute is complex, the respondent accommodated the MCA and the
Elders to the maximum possible, even more “than the required nine yards”. The
Elders in Quebec and those in Ontario, where the completion of the
investigation and the issuance of assessments was suspended during the
mediation, will be the substantial beneficiaries of the Settlement Agreement
and will have the opportunity to wipe the slate clean by asking for a
reconsideration of any assessments now made or statutorily issued in the
future.
(10) The respondent has
incurred substantial costs and could have claimed costs but has not done so in
the spirit of reconciliation and through the desire to “enter into a more
productive relationship with the Mohawks of Akwesasne.”
IV Discussion and conclusion
[22]
This
is a case where the parties to a judicial review proceeding agreed, almost
immediately, to participate in a judicially supervised mediation. The only
formal legal step which had to be taken in the proceeding was the applicants’
application for judicial supported by the applicants’ affidavit. The benefit in
proceeding this way was that, rather than the parties spending time and effort
in the legal proceedings, they concentrated their energies on attempting to
resolve the dispute in a manner that was mutually acceptable. They achieved that
resolution on May 10, 2010 with the signing of the Settlement Agreement which
was approved by this Court.
[23]
There
is no doubt in the minds of everybody concerned that the Settlement Agreement
represents a considerable achievement which materialized and matured during the
mediation during which the parties spent most of the time educating one another
and the Court.
[24]
The
Settlement Agreement could not have been reached unless the parties, with the
assistance of their legal counsel, manifested a substantial goodwill and a
spirit of compromise.
[25]
This
Settlement Agreement is to the credit of all the participants of the parties in
the mediation and particularly that of the Elders who diligently attended and
participated in all of the several mediation sessions during which they eloquently
expressed their views.
[26]
This
was a case where the parties voluntarily came to the mediation table and
settled. Generally, in such cases there are no losers only winners. Judicial
comment, which I endorse, is to the effect, unless the parties agree otherwise,
each party should bear its own costs in mediation unless the conduct of the
parties during litigation suggests otherwise. That exception does not apply
here for a number of reasons: (1) as noted, the parties did not litigate;
after the inception of the application by the applicants, the parties
mediated; (2) there were delays during the mediation process but they were
largely explained during the mediation to the general satisfaction of the
Court; (3) as noted, much time was spent understanding the issues in the case
and the international perspective (U.S.) which permeates the lives of the
Mohawks of Akwesasne; (4) on the other hand, the Elders gained a deeper
understanding of the eligibility and entitlement to OAS benefits; (5) what
difficulties surfaced during the mediation were explained and understood and
never detracted from the fundamental objective of achieving a negotiated
resolution.
[27]
The
other important factor which weighs in the Court’s mind is the chilling effect
of awarding costs against a party after the successful conclusion of mediation
even though the agreement contemplates that possibility of a cost award as it
does here.
[28]
As
pointed out by Prothonotary Lafrenière in Randall, a mediated settlement
can produce solutions that exceed those available through the Courts. As he
said, its success is contingent upon the parties buying into the process.
[29]
Clearly,
in the Court’s view, the applicants obtained in this mediation much more than
they could, had the matter been litigated. For example, much of the Settlement
Agreement rests on the exercise of the Minister’s discretion in remissions. The
Court, in judicial review, cannot dictate the exercise of discretion only its
legality. This factor is important.
[30]
More
to the point, however, this negotiated settlement has and will contribute to a
better environment and understanding in the future in matters related to Old
Age Security Act benefits. It is hope that the understanding reached here
between the Crown and the First Nation will give concrete substance to the
solution of whatever problem may emerge now or in the future.
[31]
For
all these reasons, I am of the view the applicants’ motion for costs should be
dismissed without costs.
[32]
I
close by indicating to all who participated in the mediation my appreciation in
the resolution of this matter.
ORDER
THIS COURT ORDERS that this
motion for costs by the Mohawk Council of Akwesasne on its own behalf and on
behalf of the Mohawks of Akwesasne is dismissed without costs.
“François
Lemieux”
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