Primer on Legal Costs Awarded by the Alberta Court of King’s Bench
Written by: Martin Abramowski
Costs awards are a mechanism used by the Alberta Court of King’s Bench to indemnify a party to a lawsuit for the legal costs they have incurred while prosecuting or defending against that lawsuit.
This article provides a general overview of the principles pertaining to how the Court of King’s Bench determines whether a costs award should be granted and in what amount.
The writer notes that while many of the principles and considerations discussed in this article may apply to costs awards made by the Alberta Court of Justice (i.e., the “Provincial court” in Alberta), the focus of this article is specifically on costs awards made by the Alberta Court of King’s Bench (hereafter referred to as the “Court”).
General Principles
Who Awards Costs and When?
Costs awards are granted by the Court, and specifically the Justice or Judge that presides over a Court hearing pertaining to the lawsuit.
Subject to certain exceptions, such as when a statute clearly states the contrary, costs awards are in the discretion of the Court, meaning that it is up to the Justice or Judge presiding over the matter to decide whether a costs award should be granted, and in what amount.
In some cases, while the Court will determine that a party is entitled to a costs award, the Court will direct that the amount of that costs award must be determined at an assessment hearing by an assessment officer whose sole responsibility is to determine what the amount of the costs should be.
Subject to the Court’s discretion as relates to costs awards, the Court may grant costs following an interim step in a lawsuit (such as at the conclusion of an application), after the final determination of the lawsuit (such as at the conclusion of trial), or it may make multiple costs awards at various stages of the lawsuit.
Who is Awarded Costs and Who Pays Them?
The most general principle of costs awards is that costs are typically awarded to the successful party or parties in a lawsuit and are paid by the non-successful party or parties.
In some instances, the Court may determine that a party is not entitled to costs even if they are successful in a lawsuit, in which case all parties to the lawsuit bear their own legal costs and do not receive any indemnification for them.
Where all parties in a lawsuit receive “mixed results” (i.e., there is no clear winner as all parties have succeeded on some aspects and lost on others), the Court may decline to award costs to any party, in which case all parties to the lawsuit bear their own legal costs and receive no indemnification.
How Much is Awarded for Costs?
The general rule is that a costs award only provides partial indemnification for the actual legal costs incurred. Full indemnification costs are typically only awarded in exceptional circumstances.
The tendency of awarding partial indemnification costs is used to implement a broader policy surrounding lawsuits. The Court wants to encourage parties to settle their lawsuits, and further wants to discourage vexatious or frivolous lawsuits.
The remainder of this article discusses how partial indemnification costs awards are made by the Court, and in what circumstances the Court may increase a costs award to allow for more indemnification up to and including full indemnification.
Schedule C Costs
The Court will typically refer to Schedule C of the Alberta Rules of Court (“Schedule C”) when determining the amount for a partial indemnification costs award.
Schedule C contains a tariff which allows for recoverable costs for specific steps taken by a party during a lawsuit. These steps include, among others, the preparation of a commencement document for a lawsuit, review of the opposing party’s disclosure, and the filing of an application.
The specific amount of the recoverable costs depends on what column the lawsuit falls under, which is determined based on the total amount of money which is being sued for in the lawsuit. This means that a party can expect to receive a larger sum of recoverable costs if the monetary amount of the lawsuit is on the larger end.
The recoverable costs under any column in Schedule C are quite minimal, and are never anywhere close to the actual costs incurred to perform any step which is recoverable under Schedule C, nor are they close to the total amount of legal costs typically incurred in a lawsuit generally.
Increasing Partial Indemnification Costs
The Court has at times treated Schedule C costs as the default amount when making a partial indemnification costs award.
Over the last few years, the Alberta Court of Appeal has confirmed that Schedule C costs are not in fact the default amount for costs, but simply one tool that the Court can refer to when determining an appropriate costs award.
Specifically, in the decision of McAllister v. Calgary (City), 2021 ABCA 25 (“McAllister”), the Alberta Court of Appeal clarified that in making a costs award, the Court is required to award “reasonable and proper costs”, which may or may not be achieved through relying on Schedule C depending on the circumstances of the lawsuit and the necessary and reasonable legal costs incurred during the same.
McAllister goes on to propose that where the actual legal costs incurred by a party would not adequately be indemnified, even partially, through reliance on Schedule C, and the actual legal costs incurred by that party were reasonable based on the circumstances of the lawsuit, a “reasonable and proper” costs award may require indemnification of 40-50% of the actual costs incurred by a party, which in most cases would be significantly higher than the Schedule C costs amount.
The more recent Alberta Court of Appeal decision of Barkwell v. McDonald, 2023 ABCA 87 (“Barkwell”) confirms the principles and conclusions drawn in McAllister, but further clarifies that if a party is seeking 40-50% of the legal costs they incurred, they must be able to show that the legal costs they incurred were reasonable in the circumstances (i.e., a party cannot just “run up” their legal bills unnecessarily and expect to receive 40-50% of that amount in costs).
Barkwell further notes that where a party is seeking a higher costs award on the basis that the Schedule C costs would not adequately indemnify them, that party must show the Court what the Schedule C costs would be so that the Court has a reference to assist in determining what “reasonable and proper” costs should be. This is typically done by preparing a “Bill of Costs” which shows and explains how the Schedule C costs are arrived at.
Ultimately, both McAllister and Barkwell confirm and re-iterate that in order to determine what a “reasonable and proper” costs award would be, whether with reference to Schedule C or where a party is seeking a percentage of their total legal costs incurred, the Court must consider a variety of factors to guide its discretion when making a “reasonable and proper” costs award, with such factors including but not limited to:
1. The complexity of the lawsuit - more complex lawsuits necessarily require more steps and involvement by the lawyers, and therefore cost more in legal fees, which itself may necessitate a costs award that is higher than the Schedule C amounts;
2. The importance of the issues in the lawsuit – in some cases, the Court has declined to make a costs award in favour of the successful party only because the issues at play in the lawsuit were novel and/or unclear as relates to who would succeed in the lawsuit, or otherwise important for the Court to decide on, and therefore the Court does not want to punish the unsuccessful party for participating in the lawsuit;
3. Whether a party has engaged in misconduct – if the successful party has misbehaved during the lawsuit, the Court may decline to grant them any costs notwithstanding their success. Likewise, if the non-successful party has misbehaved during the lawsuit, this alone may lead the Court to drastically increase a partial indemnification costs award, and even grant full indemnity costs, just to punish the non-successful party; and
4. Whether there were any settlement offers exchanged by the parties – if a successful party made a settlement offer that would have resulted in a better outcome for the non-successful party had they accepted it, the Court may increase the costs award on the basis that the non-successful party should have accepted the settlement offer so that the lawsuit would have been resolved sooner. Likewise, if the successful party did not accept a settlement offer which would have been better for it then the actual outcome of the lawsuit, the Court may decline to grant costs to the successful party on the basis that they should have accepted that settlement offer to resolve the lawsuit sooner.
The consideration of factors such as the ones noted above is important because Courts may not always grant a percentage of total legal costs incurred, notwithstanding McAllister and Barkwell, unless such factors lead to the conclusion that such a costs award is warranted. For example, in the recent Alberta Court of King’s Bench decision of Grimes v. Governors of the University of Lethbridge, 2023 ABKB 432 (“Grimes”), the Court noted that McAllister and Barkwell have not, and should not, change the law such that the presumption is that costs awards should always be 40-50% of the actual legal costs incurred, even if those costs were reasonable, because the Court must ultimately engage with the factors that guide its discretion to determine whether Schedule C, a percentage of actual legal costs incurred, or some other calculation of costs (such as a multiplier of the applicable Schedule C costs amount), result in “reasonable and proper” costs in any given circumstance.
Conclusion
Per McAllister, Barkwell, and Grimes, the following practical considerations should be considered when preparing submissions to the Court for what a “reasonable and proper” costs award should be in any given lawsuit:
1. Partial indemnification costs, as opposed to full indemnification costs, are the norm, and therefore the Court will usually refer to Schedule C as a starting point when determining costs, since doing so provides a simpler calculation, even if Schedule C is technically not the default or the only way of determining a costs award;
2. If a party is seeking an amount of costs which is higher than the applicable Schedule C amount, that party should prepare “Bills of Costs” showing and explaining both what the Schedule C amount would be, as well as what their actual costs incurred were, so that the Court has an easier time comparing both calculations when making its determination;
3. A party must also be prepared to show that their actual costs incurred were reasonable based on the circumstances of the lawsuit. In this context, the Court may order that the party must attend at an assessment hearing to have the reasonableness of their costs determined by an assessment officer; and
4. In any event, a party must be able to engage with the various factors that guide the Court’s discretion when making a costs award, in order to justify why a costs award greater than Schedule C is warranted.
*Disclaimer: This article is not intended to provide legal advice and is for information purposes only. Should you have any further questions regarding this article or your matter, feel free to connect with a member of our Litigation Team by clicking on the following link: https://sb-llp.com/civil-litigation