The Ruling on Costs in Giuliani v. Region of Halton

In Giuliani v. Region of Halton, 2011 ONSC 5119 (CanLII) the Honourable Justice John Murray of the Ontario Superior Court of Justice, recently delivered his reasons on costs of the action, in which the Plaintiff was awarded damages of $375,000 at trial, yet claimed in excess of $550,000 for legal fees on a substantial indemnity basis, and disbursements in excess of $225,000, including a claim for over $90,000 in interest upon a $150,000 “litigation loan” borrowed by the Plaintiff from Lexfund Management Inc., just prior to trial. This loan had an annual effective interest rate of just over 51%, and an “early payment fee” equivalent to 24 months of interest ($206,936.72).  Thus the Plaintiff, who borrowed only $150,000, would owe no less than $356,000 if she was required to repay the loan, and attempted to do so anytime in the first two years after borrowing.

In a strongly worded decision, Justice Murray rejected the claim for interest upon the Lexfund loan, questioning whether such loans with high interest that need not be repaid if the Plaintiff loses their case, amount to an indirect form of Champtery, and found that to order the Defendants to pay such interest would bring the administration of justice into disrepute.

Justice Murray also significantly reduced the amounts claimed for legal fees and other disbursements, based (in part) upon a comparison of time spent/docketed by both sides, a review of the retainer agreements betweeen the Plaintiff and her counsel, s.20(2) of the Solicitor’s Act, the Court of Appeal decision in Zesta Engineering v. Cloutier, and the factors under Rule 57.

Justice Murray’s decision is comprehensive and an extremely useful review of the law with respect to costs, and in this author’s humble opinion strikes a blow against “litigation loans” over which Defendants have no control, yet in this case were looked to by the Plaintiff to pay the interest upon…interest which nearly matched the damage award itself!

The legal press has already noted this decision and begin to comment upon it:

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