Introduction

It’s safe to say that “stare decisis” is one of the most common Latin phrases in law (and that’s saying something). It literally means “to stand by that which was decided.”[1] As a legal principle, stare decisis sets the parameters for when courts must follow, or can depart from, precedent.

The Plaintiffs in the recent Nova Scotia case of Ackerman v Deckman Trust, 2014 NSSC 335 tested the boundaries of stare decisis, but—spoiler alert—the Court “stood by that which was decided” and followed an earlier Court of Appeal decision.

Facts

The Plaintiffs were mortgagees and had brought foreclosure proceedings.[2] The Defendant made what it thought to be a full payment after the Plaintiffs issued their Statement of Claim, but the Plaintiffs considered it to be part payment only. They also claimed entitlement to solicitor-client costs pursuant to the mortgage, and sought summary judgment on that issue.[3]

By way of review, Rule 77.01(1)(b) of the Nova Scotia Civil Procedure Rules says that solicitor-client costs “may be awarded in exceptional circumstances to compensate a party fully for the expenses of litigation.” (Emphasis added.) The more typical measure is “party and party costs,” explained in Rule 77.01(1)(a) as an award “by which one party compensates another party for part of the compensated party’s expenses of litigation.”

The legal issue on the summary judgment motion was whether the mortgage required the mortgagor to essentially cover the mortgagee’s legal costs at the “exceptional” solicitor-client level. The relevant part of the clause at issue provided that:[4]

…all solicitor’s charges or commissions for in respect of the collection of any overdue interest, principle, insurance premiums or any other monies whatsoever payable by the Mortgagor hereunder, as between solicitor and client, whether any action or any judicial proceedings to enforce such payment has been taken or not and the amount so paid shall be added to the debt hereby secured and be a charge on the said lands and shall bear interest at the same rate and shall be forthwith payable by the Mortgagor to the Mortgagee and the non-payment of such an amount shall entitle the Mortgagee to exercise the powers exercisable for breach of the covenant first here and before contained…

[Emphasis added]

The Defendant disputed that it had to pay the higher amount.

Arguments on stare decisis

Both sides were able to point to allegedly supportive precedents.

The Plaintiff, to Canada Trustco Mortgage Co v Homburg (“Homburg”),[5] where the NS Supreme Court held that “the law in Nova Scotia is that where a mortgage stipulates the mortgagor pays to the mortgagee costs on a solicitor and client basis, costs should be awarded on that basis except in special circumstances.”[6] In Homburg, Justice Davison accepted that “special circumstances” would exist where solicitor-client costs would be “unfair or unduly onerous,”[7] and agreed that special circumstances existed on the facts because the mortgagee’s firm had billed “unnecessary” legal costs.[8]

The Defendant relied on the much earlier decision of the Appeal Division (as it then was) in Craig v Sousa,[9] where the clause was almost word-for-word the same as in the present case. The Appeal Division held that the clause did not require payment of the solicitor-client amount:

It has nothing to do with what happens after the mortgage debt has become crystallized and is the subject of foreclosure proceedings. It thus cannot affect the taxable costs that the trial judge in her discretion could order paid, nor can it limit that discretion.[10]

In the result, Justice Scaravelli in Ackerman distinguished Homburg and followed the Appeal Division in Craig.

Homburg was distinguishable because the mortgage clause at issue there “made specific reference to solicitor-client costs (not costs ‘as between solicitor and client’) and to a foreclosure proceeding.”[11] Relying on this difference in wording was not just splitting hairs, as a comparison of both cases revealed:

Whereas the provision in Craig did not address what happened after crystallization of the debt and the commencement of foreclosure proceeding[s], the Homburg clause clearly stated that “after default, the mortgagor shall pay the mortgagees legal expenses on a solicitor and client basis with respect to collecting money payable under the mortgage”.[12]

Other cases had misinterpreted the reach of Homburg, which was tied to the “specific language of the mortgage” and not meant as a broad statement on the availability of solicitor-client costs; according to Justice Scaravelli, “The cases that followed tended to treat Homburg as if it set out a sweeping rule governing any mortgage that permits recovery of legal costs regardless of the specific language.”[13]

And, of course, as an appellate-level decision, Craig was presumptively binding on the Court in Ackerman:

[23]         The general principle of stare decisis is that a subordinate court must not disregard a prior decision of a Superior Court within its territorial jurisdiction.  An exception to the rule exists where a decision is reached per incuriam.  Such a decision ignores case law which would have been binding on the court.  Halsbury’s Laws of Canada – Civil Procedure [2012] Reissue, see also Smith v. Atlantic Wholesalers Limited [2012] N.S.J. 17.

The Court’s reference to Smith v Atlantic Wholesalers Ltd is noteworthy. In that case, Justice Wood wrestled with the requirements ofstare decisis, but ultimately concluded that a previous Court of Appeal decision—on the applicable limitation period for a third-party indemnity claim—was wrongly decided, because it failed to consider a Supreme Court of Canada case on the same issue. Justice Wood refused to follow the Court of Appeal case,[14] stating that “a decision is considered to be per incuriam and therefore an exception to the stare decisis rule if it is made without consideration of existing binding authority.”[15]

Returning to Ackerman, Justice Scaravelli rejected the Plaintiffs’ argument that Craig was wrongly decided.[16]

Recall that Craig was decided in 1984: The Plaintiffs’ boundary-pushing alternative argument was that Craig was “dated” and “the passage of time can cause stare decisis to lapse.”[17]

Noting that the Plaintiffs had not provided any authority to support this argument,[18] Justice Scaravelli did not accept that position, concluding:

In my view there is no basis to find that Craig does not remain good law. Only a contrary decision of the Court of Appeal or the Supreme Court of Canada can have that effect. It follows that the Craig decision governs a mortgage with similar language to that in this case. … Accordingly the defendant is not contractually obligated to pay costs as on an elevated scale between solicitor and client in these proceedings.[19]

Final comments

Ackerman is a relatively by-the-book application of stare decisis, but a straightforward review of a common concept is always welcome. Also important is the Court’s refusal to engage with the idea that a case can become “stale” and inapplicable by the passage of time alone. Finally, the case comes at an interesting time when compared to what’s happening on the parallel plane of constitutional law.

In the Supreme Court of Canada’s decision in Canada (Attorney General) v Bedford,[20]  Chief Justice McLachlin accepted that stare decisis is more flexible in constitutional cases:

[43]      The intervener, the David Asper Centre for Constitutional Rights, argues that the common law principle of stare decisis is subordinate to the Constitution and cannot require a court to uphold a law which is unconstitutional.  It submits that lower courts should not be limited to acting as “mere scribe[s]”, creating a record and findings without conducting a legal analysis (I.F., at para. 25).

[44]      I agree. As the David Asper Centre also noted, however, a lower court is not entitled to ignore binding precedent, and the threshold for revisiting a matter is not an easy one to reach.  In my view, as discussed above, this threshold is met when a new legal issue is raised, or if there is a significant change in the circumstances or evidence.  This balances the need for finality and stability with the recognition that when an appropriate case arises for revisiting precedent, a lower court must be able to perform its full role.

The Supreme Court has therefore opened the door to creative arguments about the scope of stare decisis in constitutional challenges. But in a more typical civil suit, a court is much less likely to ‘colour outside the lines’ of stare decisisAckerman v Deckman Trust is a good reminder of that.