An unreasonable defence? Costs applications before the Environmental Review Tribunal

The recent decision of the Environmental Review Tribunal in CCCTE v. Ontario (Environment and Climate Change) provides a useful reminder about the basic principles and test to be applied by the Tribunal in connection with an application for costs. Importantly, the decision gives some comfort to those mounting a defence to an appeal that, even if ultimately unsuccessful in the appeal, such conduct is not in and of itself unreasonable conduct sufficient to ground a costs award.

Background

In CCCTE, an appeal was brought before the Environmental Review Tribunal in connection with certain conditions of an Amended Environmental Compliance Approval issued by the Ministry of the Environment and Climate Change in relation to the closure of a landfill owned by Waste Management of Canada Corporation ("WMC"). Party status in the hearing was sought and obtained by the Mohawks of the Bay of Quinte (the "MBQ").

The hearing of the appeal took place over 19 days in April and June 2015.

The Cost Application

Following the issuance of the Tribunal's decision in April 2016, an application for costs in the amount of approximately $445,000 was brought by the MBQ against WMC. The MBQ application was dismissed by the Tribunal.

To read the Tribunal's decision in full click here.

The Tribunal's Authority to Award Costs is Limited

The Tribunal reaffirmed the Tribunal's authority to award costs in relation to an appeal under the Environmental Protection Act arose solely from section 17.1 of the Statutory Power and Procedure Act and it is prohibited from ordering costs unless the conduct or course of conduct of a party has been unreasonable, frivolous or vexatious or a party has acted in bad faith.[1] The Tribunal noted this limited authority is emphasized by Rule 225 of the Tribunal's Rules of Practice and Practice Directions such that it is expected that costs will be awarded only in the rare case where a party's conduct warrants such an award.

Application of the Three-Stage Framework from Baker

In considering whether it had The Tribunal adopted and applied the three-stage framework identified by the Tribunal in Baker v. Ontario (Ministry of the Environment) in determining whether to grant costs.[2] The three stages are as follows:

1. The Tribunal must first determine whether a Party has engaged in unreasonable, frivolous, or vexatious conduct or acted in bad faith.
2. If so, the Tribunal then considers whether to exercise its discretion to award costs.
3. If the Tribunal exercises the discretion to award costs, the Tribunal then exercises its further discretion in determining the appropriate amount of the cost award.

The Tribunal's decision focused on the first stage of this framework and in particular, an assessment of whether WMC's conduct and/or course of conduct was unreasonable.[3]

What is Unreasonable Conduct?

To assess whether WMC's conduct was unreasonable, the Tribunal adopted the conclusion in Baker that it must consider whether WMC's conduct interfered with the Tribunal's ability to secure the just, most expeditious and cost-effective determination of the proceeding. It also adopted the reasoning in Baker that:

... First, it is the adjudicator who must measure the actual impact of the impugned conduct, or course of conduct, on the course of the proceeding, which includes consideration of the impact of the conduct on other parties. Secondly, "unreasonableness" must be assessed in terms of the circumstances which were known at the time the impugned conduct occurred, or the time over which an impugned course of conduct transpired. For conduct to be unreasonable, a party must make an improper decision to act, of fail to act, during the course of the proceeding. A decision can only be improper if the impropriety was clear in the circumstances at time the decision was made. Thirdly, an assessment as to whether conduct is unreasonable does not turn solely on whether the impugned conduct negatively affected another party. Similarly, the Tribunal may objectively find a party's conduct to be unreasonable, even though the party perceived it to be reasonable because it served the party's individual interests at the time.[4]

Particular emphasis was placed by the Tribunal in the decision on the principle that for conduct to be unreasonable "a party must have made an improper decision to act, or fail to act, during the course of the proceeding."[5]

The Tribunal found there was no indication that WMC engaged in any of the types of conduct listed in Rule 225 or any other conduct of the nature that the Tribunal would consider unreasonable.[6] Consequently, as the MBQ failed to satisfy the first stage of the Baker framework, the MBQ's application was dismissed.[7]

Importantly, as part of its reasons, the Tribunal expressly rejected the MBQ's submission that "WMC should not have defended itself in these proceedings, and instead should have agreed to the MBQ's requested from the beginning." The Tribunal went on to confirmed that it "is not unreasonable or (unusual) for a responding party to an appeal before the Tribunal to mount a defence to the appeal" and "it was not unreasonable conduct for WMC to respond in this appeal by defending its position, engaging in mediation and ultimately proceeding to a hearing on the outstanding issues." [8]

Another important aspect of the Tribunal's decision is its discussion regarding its consideration of the parties' conduct at the Tribunal-assisted mediation. In particular, the Tribunal found that:

In this case, there is no question that the discussion of the issues in mediation is intended to be confidential. Rule 157 provides that all documents submitted and all statements made at a Tribunal-assisted mediation are confidential and without prejudice. Rule 158 further provides that, if the parties to mediation do not settle a matter in its entirety, the hearing will take place without reference to the information disclosed during the mediation, except with the prior consent of all parties. Parties to mediation, while attempting to reach agreement, may ultimately take different views, and proceed to a hearing. This is common in litigation, and the Tribunal finds that it is not indicative of unreasonable conduct.[9] [emphasis added]

Notably, the Tribunal found guidance in this respect in the decision of the Ontario Divisional Court in Saltsov v. Rolnick where the Court held that:

... Without probing into without prejudice discussions, it is [...] neither possible nor desirable to assess the reasonableness of positions taken by the parties or whether the time spent in attempting to find resolution was reasonable. In short, the mediation process is neither subject to nor amenable to supervision by the Court.[10]

Key Points

In our view, this decision re-affirms several key points related to costs applications before the Tribunal:

1. The Tribunal's authority to award costs is limited by statute and it is prohibited from ordering costs unless the conduct or course of conduct of a party has been unreasonable, frivolous or vexatious or a party has acted in bad faith. The Tribunal will award costs only in rare cases.
2. The three-stage framework in Baker will be applied by the Tribunal in determining whether to award costs. Further, the considerations and conclusions of the Tribunal in Baker with respect to unreasonable conduct continue to act as the guide for the Tribunal's assessment of the conduct alleged to form the basis for a costs award.
3. While Rule 225 contains a non-exhaustive list of conduct the Tribunal can consider in assessing whether a party's conduct is unreasonable, the list provides guidance to the Tribunal as to the nature of the conduct that could be considered unreasonable.
4. Neither the mounting of a defence to an appeal by a responding party (even if ultimately unsuccessful) nor the taking of different positions at mediation while attempting to reach agreement are not in and of themselves indicative of unreasonable conduct.