ONCA Clarifies Scope of Court’s Jurisdiction to Award Costs Against Non-Parties

In what is certainly the most significant decision regarding the court’s ability to award costs against non-parties in over 45 years, the Ontario Court of Appeal has clarified the source of the court’s jurisdiction to award costs against non-parties and the applicable tests to be applied.

Chief Justice Strathy, writing for a unanimous court, noted that there had been considerable ambiguity in the case law as to whether the court possesses inherent jurisdiction, in addition to its explicit statutory jurisdiction, to award costs against a non-party. Strathy C.J.O. concluded that the court does in fact possession inherent jurisdiction in addition to its statutory jurisdiction.

Statutory Jurisdiction

Section 131 of the Courts of Justice Act provides:

Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

The Court of Appeal affirmed that this statutory provision limits the court’s discretion to order costs against the named parties only unless the “person of straw” test is satisfied.

The “person of straw” exemption, which has developed over the past 100 years, will be satisfied if:

  1. The non-party has status to bring the action;
  2. The named party is not the true litigant; and
  3. The named party is a person of straw put forward to protect the true litigant from liability for costs.

Under this test, the proper inquiry is whether the intention, purpose or motive of the non-party in putting the named party forward was to avoid liability for costs.

Inherent Jurisdiction

The Court of Appeal also noted that Superior courts of record have inherent jurisdiction to control their own processes and protect them from abuse.

Importantly, the Court of Appeal also held that s.131 of the Courts of Justice Act does not exclude inherent jurisdiction to order costs against a non-party who commits an abuse of process.

Abuse of process has been previously characterized by the courts as “the bringing of proceedings that are unfair to the point that they are contrary to the interest of justice” or “oppressive” or “vexatious” treatment that undermines “the public interest in a fair and just trial process and the proper administration of justice.”

Strathy C.J.O. provided some past examples of cases where conduct was held to be an abuse of process, such as initiating proceedings through a nominal plaintiff in order to oppress the defendant, or where the non-party has engaged in conduct that amounts to the tort of maintenance.

The class of cases where costs may be awarded against non-parties for abuse of process is not closed. The Court of Appeal explicitly stated that “situations of gross misconduct, vexatious conduct, or conduct by a non-party that undermines the fair administration of justice other than those discussed above can be envisioned.”

The decision is a must read for any litigant seeking to obtain costs against a non-party and will no doubt serve as the jumping off point for a body of case law which will shape the parameters of what sort of conduct ought to be classified as an “abuse of process” such that it warrants the award of costs against a non-party.

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