There is an old adage that "you can't fight City Hall". The phrase originated in the United States to encapsulate the idea that an ordinary person cannot overcome the rules and systems of government. However, ordinary people fight City Hall over various things, such as zoning by-laws. Sometimes people win. Sometimes people lose.

In the recent case of Miele v. Bevilacqua, 2022 ONSC 2065 (CanLII), the plaintiff's fight against City Hall proved very costly.

The plaintiff was a failed Mayoral candidate in the 2018 election. He had a lengthy and successful career working in municipal management in various cities. He had been the Executive Director of Economic Development for the City of Niagara Falls, had been the Commissioner of Economic Development for the City of Scarborough, and, for 17 years, had been the Commissioner of Economic/Technology Development and Corporate Communications for the City of Vaughan.

While working for Vaughan, the plaintiff was also the Chief Administrative Officer for three other municipalities. He was the author of a book on economic development and, among other things, taught courses at two universities and a college. He was described by the Court as "a highly experienced municipal administrator and a leading practitioner and academic in the field of urban economic development."

In 2019, the plaintiff commenced a $210 million lawsuit against the City of Vaughan and its Members of Council. He alleged that from 2014 to 2018, the City had incurred an unlawful deficit which it failed to disclose, while collecting $152 million in surplus funds in its water reserve fund. Of that amount, the plaintiff claimed that nearly $140 million was unaccounted for and used to reduce the illegal, hidden deficits.

The plaintiff's action sought declarations of illegality and personal liability and a declaration that individual defendant Members of Council should be disqualified from holding office for two years.

During the course of the lawsuit, the Court noted that the plaintiff took some aggressive litigation tactics, which included intervening in an application to prevent the City from obtaining an order that would allow the Members of Council to instruct City staff on how to defend the plaintiff's action and/or potentially settle the claim. Since the plaintiff had sued the Members of Council personally, they were technically in a conflict of interest under the Municipal Conflict of Interest Act (the "MCIA") and thus needed an order under section 7(2) of the MCIA.

The plaintiff also threatened one of the councillors with a provincial offence and criminal charges for failing to withdraw a declaration of conflict of interest in order to deal with the plaintiff's action. The plaintiff had discontinued his action against this councillor, but the councillor had maintained her declaration of conflict of interest. The plaintiff instructed his original lawyer to send the councillor a letter which said as follows:

While it is not yet fully clear as to the cause of Council[l]or Racco's decision to declare interest (given that written reasons were not provided, though required), we are exploring allegations of "Obstruction" under the Municipal Act as well as "Municipal Corruption" and "Influencing Municipal Official" under s. 123(1-2) of the Criminal Code of Canada which will likely result in the involvement of the Ontario Provincial Police.

The plaintiff ultimately hired a new lawyer and shortly thereafter wrote a personal and confidential apology to the Mayor of Vaughan for his action and had the action dismissed.

The defendants sought costs of $1.2 million. They each showed that they had all incurred significant legal fees in defending themselves against the plaintiff's claim. The City also showed that it had incurred a disbursement of $280,000 for audits that had to be conducted as a result of the plaintiff's allegations of financial wrongdoing.

The plaintiff argued that the defendants were only entitled to a fraction of their costs. He argued that:

  • the action had been brought in the public interest;
  • he had been duped by another unsuccessful candidate to become the plaintiff;
  • he was unsophisticated in municipal finance and could not understand the allegations made in the claim;
  • he was incapable of thinking clearly at the relevant time;
  • the defendants' legal costs were covered by insurance; and
  • he only had a modest income and a property with $1.5 million in equity.

Under section 131 of the Courts of Justice Act, the court has discretion to award costs. However, in general, costs awards in Ontario and throughout Canada are based on a "loser pays" principle. The most common costs order is an award of partial indemnity costs.

The rule of thumb is that this award entitles the successful party to recover about 60% of his or her legal costs, plus disbursements and taxes.

A party can also be awarded substantial indemnity costs. Under rule 1.03 of the Rules of Civil Procedure "substantial indemnity costs" is 1.5 times the regular 60% award or, in other words, 90%.

In making a costs award, a court must consider the factors set out in rule 57 of the Rules and based on the seminal case of Boucher v. Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), the court should take into account the reasonable amount of costs the losing party ought to have expected to pay.

The court rejected all of the plaintiff's arguments made against the imposition of a costs order on either a partial or substantial indemnity basis. The court, among other things, noted that the plaintiff had made very serious allegations of misfeasance in public office against the individual defendants and that he was highly experienced in municipal management.

The court rejected that the plaintiff had been duped into becoming the plaintiff or that he was incapable of understanding his own action at the time that it was commenced.

As well, the plaintiff's action was not public interest litigation. The court explained that an action which was manifestly devoid of merit could not be in the public interest. In Ford v. Windsor (City), 2018 ONSC 4211, the court found that while calling government officials to account was in the public interest, "launching unfounded allegations against government officials is not."

The plaintiff's action had also caused the City and individual defendants prejudice.

The plaintiff attempted to avoid a significant order by showing that he had issued a public apology and that his original lawyer was to blame for the action. However, the court found that the public apology, which was made on the day before the costs hearing before the court, was "situational" and that blaming the lawyer for the costs was unsupportable. The court noted that apart from rule 57.07, it knew of "no law that allows a client to be freed from an obligation to pay costs on the basis that his or her lawyer was at fault for bringing frivolous proceedings."

In the result, the court found that it was fair and reasonable for the plaintiff to pay the defendants their costs on a substantial indemnity basis. The action lacked merit and the plaintiff had engaged in "hardball tactics". The court also found that the plaintiff's behaviour was reprehensible.

This case serves as a reminder that there can be significant cost risks to a losing party in an action and that meritless claims and overly aggressive and reprehensible conduct during the course of action can attract a higher costs award than the usual partial indemnity award. This can especially be the case in high profile actions which contain serious meritless allegations of misfeasance in public office or corruption by duly elected politicians. In such circumstances, politicians, who arguably suffer potential reputational harm as a result of the allegations being made in the first place, should not be obligated to dig into their own pockets to pay for the costs of defending themselves. Accordingly, a plaintiff should carefully consider the potential cost risks before bringing an action against a government or an elected politician.

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