Canada: Cost Recovery Under the Human Rights System - Is it Just an Urban Legend?

The ability to recover legal costs incurred in pursuing or defending a human rights complaint has been the subject of debate for years. Last week, the Supreme Court of Canada ("SCC") has indicated its intention to resolve this issue within the federal human rights regime by granting leave to appeal the decision to deny a complainant her legal costs in Canada (Canadian Human Rights Commission) v. Canada (Attorney General), Donna Mowat. Although the SCC will be considering the issue of cost recovery in the Federal context, we are hopeful that it will lead to certainty in all Canadian jurisdictions.

Mowat was a Master Corporal in the Canadian Armed Forces ("CAF") with a problematic career from the start. After she was released for becoming intoxicated at a CAF dinner and using abusive language toward her superiors and subordinates, she commenced a complaint under the Canadian Human Rights Act alleging discrimination on the basis of sex, and sexual harassment. Mowat claimed $431,000 in damages, but was only awarded $9,000 with respect to her claim for sexual harassment resulting from inappropriate comments made to her by one of her co-workers. Mowat sought legal costs as well. At the Tribunal level, she was denied costs on the basis that the Canadian Human Rights Act does not provide for the granting of costs. Mowat appealed the denial of costs to the Federal Court, and was awarded $47,000 in costs notwithstanding her relative lack of success. The Federal Court found that that the Act allows the Tribunal to order compensation for any "expenses" incurred by the victim. The Attorney General then successfully appealed to the Federal Court of Appeal arguing that legal costs are not the same as "expenses". The Canadian Human Rights Commission has now been granted leave to appeal to the SCC hoping to preserve the right of complainants to recover their legal costs.

The Canadian Human Rights Act governs federally regulated employers. Provincially regulated employers are governed by their respective provincial human rights statutes. Other Canadian jurisdictions, such as British Columbia, Manitoba, the Northwest Territories, Nunavut and the Yukon have enacted legislation that provides for cost recovery under certain circumstances i.e. where the complaint is frivolous or one of the parties has engaged in improper conduct that has prolonged the process. The human rights statutes in Ontario, Saskatchewan, Nova Scotia, and New Brunswick are similar to the federal legislation in that they are silent with respect to the issue of legal costs, and simply provide for compensation for losses resulting from discrimination or harassment. Only Alberta, Quebec, and Prince Edward Island have enacted legislation that expressly authorizes their respective tribunals to award costs as deemed appropriate.

The Canadian Human Rights Act provides that the Tribunal may order the offending party to compensate the victim for lost wages and "expenses" arising from the discrimination. "Expenses" is not defined, and therefore, inconsistent decisions have resulted over the years in the Federal context as to whether the Tribunal has the requisite authority to award legal costs to a complainant. There has never been a ruling by the Federal Tribunal awarding costs to a respondent.

In British Columbia, the Human Rights Tribunal is expressly authorized to award costs, but limits this authority to situations where a party has acted improperly during the complaint process. Notwithstanding this restricted authority, in 2008, the B.C. Tribunal awarded legal costs to a complainant in Senyk v. WFG Agency Network (B.C.) Inc. in the absence of improper conduct on the part of the respondent during the complaint process. Similar to the Federal Court in Mowat, the B.C. Tribunal awarded legal costs to the complainant under the section which provides compensation for "expenses incurred as a result of the contravention."

Despite the findings of the Canadian and B.C. Human Rights Tribunals, the Ontario Tribunal, which may award compensation for losses arising out of the infringement, has consistently held that there is no authority to award costs under any circumstance.

Consider the recent Ontario complaint dealing with the gym owner, John Fulton, who denied a gym membership to a man who disclosed that he would be undergoing a sex change operation to become a woman and wanted to use the female facilities. The owner concluded that it could not accommodate the complainant. Once Mr. Fulton had spent $150,000 in legal fees, the complainant suddenly withdrew his complaint. Mr. Fulton attempted to recover his legal fees, but the Tribunal held that there was no statutory authority under the Ontario Human Rights Code to award costs, and therefore, he was simply out of pocket for these costs.

The new Tribunal system in Ontario which came into force in July of 2008, and similar to the B.C. direct access system, was meant to redress some of the chronic wrongs historically plaguing the Ontario regime; however, the Tribunal has yet to adopt any rules regarding the payment of legal costs to either the complainant or the respondent regardless of success. It is believed by some that imposing costs would render access to justice difficult for those who cannot afford to pay costs, and victims would be unable to pursue legitimate complaints. However, the new Ontario system has eliminated the mechanism that was once in place to screen out frivolous claims at the outset, removed its former caps on damages, and has created a separate agency which offers free legal assistance to complainants. Accordingly, there are no repercussions for commencing a frivolous complaint in which extraordinary damages are sought.

This does not mean that employers in those jurisdictions which do not have express language to deal with legal costs should simply surrender from the outset and write a cheque for the full amount claimed. Employers have an interest in protecting their reputations and sending a message to other employees that they will vigorously defend frivolous complaints. Until Mowat is decided and/or clear legislation is enacted, it remains wise to retain legal counsel as soon as a complaint is received in order to avoid making inadvertent, but costly mistakes. Skilled legal counsel will assist with the preparation of a solid response and compile the necessary evidence to discourage the complainant from pursuing the complaint at all or for the full amount claimed.

In the meantime, we remain optimistic that the Mowat decision will provide the equitable balance required in the human rights regime in many Canadian jurisdictions, or at least encourage those jurisdictions to enact rules explicitly allowing costs to be awarded to the successful party.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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