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The Supreme Court of Canada has clamped down on a funding lifeline for would-be litigants who lack the resources to mount important legal challenges.

In a 7-2 ruling, the Court refused to order advance funding to a Vancouver gay and lesbian bookstore, saying the challenge to Canada Customs is too narrow and insignificant to the broad public interest to justify such an unusual move.

"Public interest advance costs orders must be granted with caution, as a last resort, in circumstances where their necessity is clearly established," said reasons supplied by five of the majority judges - Mr. Justice Michel Bastarache, Mr. Justice Louis LeBel, Madame Justice Marie Deschamps, Madame Justice Rosalie Abella and Mr. Justice Marshall Rothstein.

Chief Justice Beverley McLachlin and Madam Justice Louise Charron agreed with the majority, but supplied separate reasons.

"The standard is a high one," Mr. Justice Bastarache and Mr. Justice LeBel wrote for the five-judge group. They said that only "the rare and exceptional" case is special enough to warrant an advance costs award.

The immediate loser in today's decision was a struggling Vancouver gay and lesbian bookstore - Little Sister's Book and Art Emporium - that is engaged in a protracted battle with Customs over four books it was prohibited from selling on the basis of obscenity.

Little Sister's had asked the Supreme Court to restore a funding lifeline - granted by a trial judge and then severed by the British Columbia Court of Appeal - that would have let it proceed with its battle to call Customs to account for the way it operates.

In the broader picture, however, a wide spectrum of groups had seen the decision as potentially reaching far beyond the issue of censorship. They saw it as potentially offering a vital leg up to any litigant who was attempting to take an important issue to court yet lacked the financial backing.

"This case shows that the fundamental need for the program is to allow the vast majority of Canadians who can not afford to go to court to uphold their Charter rights to take on bureaucracies who may ignore their rights even when called upon to do so by the courts," University of Ottawa law professor Errol Mendes said in an interview. "The decision can also be said to illustrate how the most vulnerable minority groups in our society are now out in the cold, both on the access to justice front and now even the rule of law front"

Several intervenors, ranging from the Canadian Bar Association to the Sierra Legal Defence Fund, had weighed in on the case with their views on the funding issue.

Little Sister's specific allegation in the case was that Customs had been disobeying a order the Supreme Court issued several years ago that it not ban material in an arbitrary and discriminatory manner.

The ruling all but chokes any possibility of advance funding in future cases, University of Toronto Law Professor Brenda Cossman said. "In order to get advance costs, you have to show that your case is unbelievably, totally special," she said. "If this case wasn't exceptional, I don't know what is.

"This was an action involving an unrelenting censor with whom Little Sisters had been battling for 12 years - and they were operating in defiance of a Supreme Court order," Prof. Cossman said. "If Little Sisters doesn't challenge them, no one will."

In its 2000 decision, the Supreme Court had ruled that customs officials were harassing the bookstore by seizing its books and videos. It said Canada Customs has the right to censor material, but that it was doing so unfairly and needed to change its procedures.

Little Sisters maintains the department has not changed its practices. The four publications at the heart of the fight were two series of Meatmen comic books, and two books that depict bondage and sadomasochism.

In a vigorous dissent, Mr. Justice Ian Binnie and Mr. Justice Morris Fish disagreed with the majority today. They said that the ramifications of the first Little Sister's case actually "go to the heart and soul of Little Sister's present application."

"The present proceeding is not the beginning of a litigation journey," they said. "It is 12 years into it. ... Given that 70 per cent of Customs detentions are of gay and lesbian material, there is unfinished business of high public importance left over from Little Sister's No.1."

The majority, however, said that Little Sister's challenge to Customs "was extremely limited in scope." They said that the bookstore provided no evidence to show that the four books were "integral, let alone important, to its operations."

The prohibition of the four books was merely a minor exercise of Customs power, they said, and it did "not address the issue of whether Customs is, in general, correctly applying the legal test for obscenity.

"In this context, it is impossible to conclude that Little Sister's is in the extraordinary position that would justify an award of advance costs," Judge Bastarache and Judge LeBel wrote. "The battle Little Sister's seeks to fight through the systemic review is, strictly speaking, unnecessary. ... The issues raised do not transcend the litigant's individual interests."

They also poured cold water on Little Sister's claim that its treatment by Customs betrays a systemic attempt to thwart the Court's 2000 ruling.

"While Little Sister's constitutional rights should not be understated, it has not provided prima facie evidence that it remains the victim of unfair targeting," the said.

"The fact that Customs continues to detain large quantities of imported material, including high proportions of gay and lesbian material, is not, in itself, prima facie evidence that Customs officials are performing their task improperly, much less unconstitutionally."

In dissent, Judge Binnie and Judge Fish said that the current case points directly at "numerous Charter violations and systemic problems" that were identified in the first case. "In its application for advance costs in this case, Little Sister's contended that the systemic abuses established in the earlier litigation have continued, and that Customs has shown itself to be unwilling to administer the Customs legislation fairly and without discrimination," they said.

"The public has an interest in whether its government respects the law and operates in relation to its citizens in a nondiscriminatory fashion. That is where the interest of this litigation transcends Little Sister's private interest."

The dissenting judges said that, at the outset, it would be appropriate to cap the maximum potential public contribution to Little Sister's at $300,000. "To the extent that Little Sister's can make a contribution to the costs, it should also be required to do so."

They added that if Little Sister's were successful and won substantial damages, they would have been obligated to repay the entire amount of the advance costs plus interest.

The majority specified the formula that must be used in deciding whether to grant advance costs. They said that a trial judge must consider "whether the case is sufficiently special that it would be contrary to the interests of justice to deny the advance costs application."

Any injustice that might result from denying the order "must relate both to the individual applicant and to the public at large," they added.

"Since an advance costs award is an exceptional measure, the applicant must explore all other possible funding options, including costs immunities. If the applicant cannot afford the litigation as a whole, but is not completely impecunious, the applicant must commit to making a contribution to the litigation."

The majority said that judges should also look at whether other, similar litigation is pending and may be conducted for the same purpose, without requiring an interim order of costs.

Even where advance costs are granted, they said, judges should set limits on the rates and hours of legal work chargeable and it should cap any cost award it makes "at an appropriate global amount."

Little Sister's had estimated that its litigation bill could approach $2-million if the case were to go ahead.

However, Canada Customs argued that the bookstore owners could have used some of the funds it invested in expanding the business, and shifted them to finance its legal expenses. Or the bookstore could have borrowed money for the court fight, the agency said.

The key precedent underlying the case was a 2003 Supreme Court ruling that forced Ottawa to pay the costs of a B.C. Indian band in a forestry dispute, because the band did not have enough money and there were crucial constitutional issues to be examined.