Tuesday, January 28, 2014

A Fresh Look is Needed on the Red Hill Lawsuit

More than 10 years ago, the City of Hamilton sued the federal government over delays in completing the Red Hill Expressway. The City had justification to be angry - delays had been caused by an environmental assessment ordered by the federal government which a Federal Court ruled was improper. Having obtained that ruling, the City then went on to seek $75 million in damages from the federal government, dozens of federal ministers & employees, alleging, in essence, that the environmental assessment was ordered in bad faith.

Yesterday, Hamilton council discussed whether to drop the lawsuit, but after a lengthy in camera meeting, decided against it. The reason they cited in interviews with The Spectator was that they were concerned that dropping the lawsuit now would result in the City having to pay the federal government's legal costs to date.

The City has already spent about $3 million pursuing this case, including having to pay the federal government about $310,000 in costs after losing a motion in the case. While it's true that simply dropping the case now could expose the City to paying the federal government's legal costs for the entire lawsuit, one thing that is certain is that lawsuits get more expensive as time goes on. Dropping the suit today would be costly, dropping it next year would be more costly.

The City has 3 options: drop the case, negotiate a settlement, or take the case to trial. A settlement could be 'we'll drop the case if you agree to waive your costs'.

From my limited knowledge of the case, I'd have to say that it's a difficult one. Proving that something happened is relatively easy. Proving motivation is often difficult. Proving someone did something in bad faith is usually very difficult. The City has to prove that the federal government and/or some or all of the individuals named as defendants actively and knowingly used the environmental review process in an improper manner for improper purposes. Showing they were wrong is not enough. Proving it was a mistake, or that they were aggressive in their application of the review process is not enough. They must prove intentional wrongdoing. Even a hint of 'doing the wrong thing for a proper reason' may be enough to defeat the City's claim.

I spent almost 20 years litigating big cases. Many of those cases were against the federal government. I know enough not to presume I can judge the case from the outside. There may well be factors I don't know about that make it winnable. There may be settlement discussions underway. I don't know.

However, from reading the court decisions, there are matters of concern. In the decision that granted the federal government the $310,000 in costs, the judge said:

the City changed the nature of the relief that it sought on several occasions … 
Counsel for the City has acted as if it had a client with inexhaustible resources to finance endless experimental litigation and that it could conduct litigation against the federal government with impunity. …
This motion proved to be entirely unnecessary. Over 3-1/2 years were spent in preparation and argument.  It consumed 11 court days … based on a hearing in the Federal Court which itself required only 5 days. The City was entirely unsuccessful. No findings were made by the court that the defendants had not already conceded or admitted in their statement of defence filed in 2006. In the end, 3-1/2 years of legal work by both parties, which could have been spent advancing the action, were entirely wasted.
The City took an over reaching and excessively complicated approach to this motion, filing almost 300 pages of written argument (comprising 964 paragraphs) and over 127 cases and authorities. The relief sought changed substantially on several occasions after service of the original notice of motion and even in the midst of oral argument up to the last day of the hearing of the motion. 
These are harsh words by the usually polite standards of Canadian judges. The judge found that this motion was "entirely wasted". That includes the $310,000 in costs the City had to pay to the federal government. However, it also includes whatever the City paid its own lawyers for the motion. Court ordered costs are usually only a fraction of what is actually spent, and federal government lawyers' hourly rates are often much lower than those charged by lawyers in large law firms. Given that, it would not surprise me that the City spent more than double the $310,000 on its own lawyers. As a result, the "entirely wasted" motion probably cost the City 3 1/2 years and about a million dollars (possibly more), plus all of the staff time that was devoted to it.

It appears to me that, at least in retrospect, some very poor decisions have been made with respect to how this lawsuit has been pursued. Because these matters are discussed in camera, I don't know what input was given by council, staff, or the lawyers. I don't know what recommendations were made, or who made the ultimate decisions to proceed in the manner they did. But it appears clear to me that mistakes were made.

Human nature being what it is, it's difficult to admit that you were wrong. It would be difficult for council members or staff to admit that their decisions cost the City $1 million or more with nothing to show for it. It is difficult for a lawyer to tell his or her client that he or she charged hundreds of thousands of dollars for something that yielded no results. So it's reasonable to think that those who have been involved to this point may not be objective enough to make a reasoned decision about whether, or how, to go forward.

In my view, what the City and council need now is a second opinion from a respected, objective and independent lawyer. It will cost additional money, but it is necessary at this point to set aside what has happened in the past, and consider where things stand. View it as all civil lawsuits should be viewed - as a dispute about money. Litigation is a costly, inefficient and unsatisfying way to make a point. At this stage, it's must be viewed as purely a business decision: what are the risks & costs of going forward, and what is the likelihood of recovering more than you will have to spend. It needs to be a cold and rational calculation. And I'm not sure anyone close to the case is capable of that right now.

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