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<< back to all ArticlesPaying the Price: The Law of Costs in Alberta
Civil litigation can entail significant expense for those involved. Before commencing or responding to legal proceedings, every litigant should ask, who will cover this expense?
In Alberta, as in other Canadian jurisdictions, the answer is guided by the law of costs. The law of costs consists of a set of statutory and common law rules that are well-established but leave plenty of room for judicial discretion. This blog post unpacks how costs work in civil litigation, including what they are, who pays them, and why they matter.
What Are “Costs” and “Costs Awards”?
In civil proceedings, costs refer to the expenses a party incurs during litigation. This includes legal fees paid to lawyers, disbursements (e.g., court filing fees, expert witness fees, court reporter fees, etc.), and other charges (e.g., printing costs).
Following a court application or other legal proceeding, the judge may make a costs award. Put simply, a costs award consists of an order directing one or more parties to the proceedings to pay for all or a portion of the legal expenses incurred by one or more of the other parties.
Who Is Entitled to a Costs Award?
In Alberta, the general rule is that a successful party is entitled to a costs award. The primary purpose of such an award is to indemnify the successful party for expenses incurred either in defending a claim that proved unfounded or in pursuing a valid legal right. Additional objectives of costs awards include encouraging out-of-court settlement, deterring frivolous actions and defences, and discouraging unnecessary steps in the litigation.
However, the general rule that a successful party is entitled to costs is not absolute. Costs are always in the discretion of the judge. This means that, based on the circumstances of the case, the judge can choose to deny costs or adjust the amount of costs awarded.
How are Cost Awards Calculated?
Depending on the situation, courts will usually make one of the following types of costs awards: (1) party and party costs; (2) lump sum costs; and (3) solicitor-client costs.
- Party and Party Costs
Party and party costs (also called “Schedule C” costs”) are calculated in accordance with the tariff amounts in Schedule C of the Alberta Rules of Court. Schedule C provides a list of various litigation steps (e.g., preparing pleadings, disclosing records, conducting oral questioning, etc.) and assigns dollar values to each one. The court may specify that the amount of costs to be paid is the amounts in Schedule C or a multiple, proportion, or fraction of those amounts.
The amounts in Schedule C are modest and will usually not come close to covering a party’s actual legal expenses. Ideally, party and party costs will represent partial indemnification of the successful party at a level approximating 40 to 50% of their actual costs. This aims to balance the unfairness of requiring a successful party to bear any costs with the chilling effect on parties bringing or defending claims if the unsuccessful party is required to bear all the costs.
Schedule C provides a predictable and structured way to award costs. However, Schedule C has also been referred to as a “very crude method by which to assess costs,” and it can be a poor approximator of the actual financial consequences of different steps in litigation.
- Lump Sum Costs
Instead of awarding costs with reference to Schedule C, courts may also order costs in terms of a single fixed amount. This often occurs in cases where basing costs on Schedule C would not fairly reflect the complexity, importance, or effort involved in the case.
Like party and party costs, lump sum costs awards are usually meant to provide only partial indemnification for a successful party’s legal expenses.
- Solicitor-Client Costs
Solicitor-client costs provide full indemnity for all legal fees and disbursements reasonably incurred by the party to whom they are awarded. It is well-established that solicitor-client costs are available only in “rare and exceptional circumstances,” where there has been “reprehensible, scandalous or outrageous conduct on the part of one of the parties.”
Considerations in Making a Costs Award
Judges will consider a variety of factors when deciding whether to award costs and how much to award. Common considerations include (but are not limited to):
- Settlement offers. If the successful party had made a reasonable offer to settle the case and the losing party refused it, that may justify an enhanced costs award.
- Misconduct or delay. If a party behaved improperly, dragged out the proceedings, or failed to follow the rules, the court may order them to pay more in costs (if they are the losing party) or may reduce or deny their recovery (if they are the successful party).
- Complexity of the issues. Enhanced costs may be justified where the issues in the proceedings were particularly complex and required a lot of time and effort to litigate.
- Degree of success. Where each side wins on some points and loses on others, the court may split the costs between them or reduce the amount awarded.
Judges have considerable discretion regarding how much weight they will place on any given factor. This discretion has been described as “unfettered and untrammeled,” subject only to the applicable rules of court and the need to act judicially on the facts of the case.
Conclusion
While costs are sometimes seen as an afterthought, they play an essential role in how litigation proceeds. They help compensate successful parties, encourage fair conduct, and ensure that people think carefully before choosing to go to court. For anyone involved in a legal dispute, understanding the basics of costs is key to managing risk and making informed decisions.
If you are considering litigation or are already involved in a legal dispute, it is worth speaking with your lawyer early about the potential cost consequences of any course of action.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.
