While it is firmly established that a successful party may recover their legal costs from an opposing party in a civil court action, the same cannot be said for proceedings before administrative tribunals.  There has been significant debate about whether human rights tribunals in particular ought to make awards in respect of legal costs.  Some view this as a matter of access to justice, while others see it as an effective barrier to defending, if not precluding, frivolous and/or vexatious complaints.

The Supreme Court decisively resolved this debate at the federal level when it recently ruled that the Canadian Human Rights Tribunal’s power to compensate "any expense" suffered by victims of discrimination did not extend to an award of legal costs.  Simply put, the court held it was unreasonable to equate "costs", a legal term of art, with "expense".

In a case of questionable merit, the complainant incurred $196,000 in legal fees to achieve an award of merely $4,000, which compensated her for "suffering in respect of feelings or self-respect".  The Tribunal concluded that because the complainant had achieved some measure of success, it was appropriate to issue a costs award of $47,000. The Tribunal relied on policy considerations about access to justice to ground its broad interpretation of "any expense" as providing authority to make the costs award.

The Attorney General appealed to the Federal Court, which upheld the award, and then again to the Federal Court of Appeal, which quashed the award.  As a seven-member panel, the Supreme Court unanimously upheld the Federal Court of Appeal's decision.

Among its reasons, the Supreme Court placed significant emphasis on "costs" being a legal term of art recognized across jurisdictions and contexts.  It was therefore unreasonable for the Tribunal to infer an authority to award costs from the language "any expense" when legal “costs” had such extensive recognition and specialized meaning.

The Supreme Court noted that this view accorded with how provincial legislatures let their respective human rights tribunals know when awards of legal "costs" could be made, if any. 

For example, British Columbia allows costs to be awarded if there is "improper conduct" during the course of the complaint.  In Manitoba and the Northwest Territories, the conduct must be "frivolous or vexatious" for costs to be awarded.  In Alberta, Saskatchewan, Prince Edward Island, and Newfoundland, human rights tribunals can make any "appropriate" cost orders, while a tribunal in Québec may award costs "as it determines". 

Regardless of whether the Supreme Court was correct in stating that the Ontario Human Rights Tribunal is empowered to make its own rules regarding costs under the Statutory Powers Procedures Act in respect of “unreasonable, frivolous or vexatious” complaints, it is important to note that as of writing, no rule has been enacted.  In fact, the Ontario Human Rights Tribunal has consistently held that following amendments to the Human Rights Code in 2008, it has no jurisdiction to make any award in respect of legal costs.  See Dunn v. United Transportation Union, Local 104 for a discussion on this topic.

Although limited to the federal context, the Supreme Court's recognition that "costs" is a legal term of art sheds significant clarity on when a party may be liable for the opposing party’s legal fees when litigating before an administrative tribunal.  Determining this at the outset of any proposed litigation is a strategically crucial factor to consider.  For example, if the tribunal can award costs and the complainant is represented by counsel, settlement offers that include payments in respect of legal costs often have a strong effect on facilitating settlement.  Doing so could have avoided the situation the Supreme Court was faced with here, where the complainant incurred $196,000 in legal fees to recover merely $4,000 in damages.

Given the number of specialized tribunals which adjudicate workplace disputes, employers should always consult with their labour and employment counsel before making assumptions about a particular tribunal's ability to award costs.  The misapprehension about the Ontario Human Rights Tribunal’s powers, for example, serves as an important cautionary tale.

Prepared with the assistance of Ryan Edmonds, Student-at-Law.