Lawyers say a recent case, in which a deputy judge ordered an unsuccessful litigant to pay $21,000 in costs to a defendant who spent more than $158,000, exposes the inability of the Small Claims Court to impose high penalties on people who bring meritless litigation.
Lawyers say a recent case, in which a deputy judge ordered an unsuccessful litigant to pay $21,000 in costs to a defendant who spent more than $158,000, exposes the inability of the Small Claims Court to impose high penalties on people who bring meritless litigation.
In Lahrkamp v. Metropolitan Toronto Condominium Corp. No. 932, a condo owner, Michael Lahrkamp, started a number of proceedings against his condo corporation that turned into what the courts described as a “long, tortuous, labyrinthine and costly litigation saga.”
After a 12-day trial, a Small Claims Court deputy judge dismissed Lahrkamp’s most recent actions and determined that his conduct was so unreasonable and without merit that the matter was a “complete waste of time and money.” The deputy judge determined that Lahrkamp’s “unreasonable behaviour” prolonged the proceedings and “cries out for a significant cost penalty.”
An Ontario Superior Court justice subsequently barred Lahrkamp from starting any further proceedings against the defendant without leave from a judge, finding the plaintiff was “litigating to harass, not to vindicate a legitimate right.”
While the cost award was precedent setting for the Small Claims Court, lawyers and paralegals who practise in the court say the case shows how vexatious litigants can take advantage of the system, spinning large webs of litigation without any fear of having to pay significant legal costs.
Jonathan Fine, the lawyer who represented the condo corporation, says that while Lahrkamp did not expect to pay $21,000, the case shows that vexatious litigants can take advantage of the system.
“It was very important to them that they win,” Fine says of his client. “Unfortunately, it came at great cost.”
Lahrkamp first started launching proceedings against his condo corporation after he was not satisfied with documents he received after requesting information about renovations to the lobby of his building in 2006.
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By 2008, he had started five separate Small Claims Court actions against the condo corporation about the production of various documents, which were eventually consolidated into one proceeding.
After that claim was dismissed, Lahrkamp brought another Small Claims Court action in 2009, demanding further documentation, which was partially granted. He then started actions in 2013, 2014 and 2015.
The amount claimed in the most recent proceeding was $1,500.
Cost orders in the Small Claims Court generally do not exceed 15 per cent of the amount claimed, but in Lahrkamp’s case, Deputy Judge Jack Prattas found that a penalty on the high side within the court’s cost framework would be appropriate.
In his decision that prohibited Lahrkamp from bringing more litigation without leave, Ontario Superior Court Justice Markus Koehnen took the opportunity to comment on the inability of cost orders in the Small Claims Court to stop vexatious litigants from running up steep legal costs for defendants.
“This represents only a small fraction of actual costs and is wholly inadequate to compensate the Corporation,” Koehnen said of the costs award.
“None of this is intended to be in any way critical of Prattas DJ. He was limited by principles applicable to cost awards. It does, however, demonstrate that costs orders do not prevent vexatious litigants from causing financial harm to others through their litigation.”
Paralegal Rick Goodman, who was not involved in the case, says that the costs decision signals to litigants bringing weak or vexatious claims that they can face costs that will amount to more than 15 per cent of their claim. He says this costs award is designed to discourage parties from being vexatious and thinking they can drag out long trials without any repercussions.
“I doubt very much that Mr. Lahrkamp or anybody would have expected that, for a $1,500 claim, if they lost, would be looking at a costs award against them of this magnitude,” he says.
In the most recent decision in the case, the Divisional Court denied Lahrkamp’s leave application to appeal the costs order.
The condo corporation argued that the Divisional Court had no jurisdiction to hear an appeal of the final order, as the amount in dispute in the claim was less than $2,500. The judge hearing the application agreed with this, but found that the court did have jurisdiction to hear an appeal as to costs because the opposite result would be “contrary to the interests of justice.”
Justice Harriet Sachs, however, found that the trial judge had made no error in the costs order.
Timothy Duggan, the lawyer who represented Lahrkamp, says he argued that the Divisional Court should take a look at the costs award on the basis of access to justice concerns that it could deter litigants from bringing legitimate claims in the Small Claims Court in the future.
“Ultimately, Justice Sachs disagreed and held that the Small Claims Court costs award did not raise an issue of broader importance,” he says. Duggan says his client has not decided yet whether to seek to appeal the Divisional Court’s finding.