Woolley j

4.29: Costs consequences of formal offer to settle
10.29: General rule for payment of litigation costs
10.31: Court-ordered costs award
10.33: Court considerations in making costs award
SCHEDULE C: Tariff of Recoverable Fees

Case Summary

After the Plaintiff’s claims against the Defendants were summarily dismissed, the Defendants sought their Costs based on a percentage of fees rather than Schedule C. The Defendants argued that the Plaintiff had engaged in misconduct, entitling them to enhanced Costs. They also argued that Schedule C is outdated, and that they should be entitled to 70% of their legal fees. Alternatively, if Schedule C were to be relied on, they argued it should be subject to a 45.60% adjustment to account for inflation.

The Defendants had also served a Formal Offer to Settle on the Plaintiff before their Statement of Defence was filed, permitting a discontinuance without Costs within 30 days, and a discontinuance with $5,000 in Costs if accepted after 30 days. The Formal Offer was not accepted, which the Defendants argued entitled them to double Costs after the date of the Offer in accordance with Rule 4.29.

Justice Woolley first explained that pursuant to Rule 10.29(1)(a), the successful party is generally entitled to their Costs. While Costs are discretionary, the factors listed at Rule 10.33 should be considered in determining the amount of Costs to award. Her Ladyship further noted that pursuant to Rule 4.29(3), if a Defendant makes a Formal Offer to Settle that is not accepted, that Defendant is entitled to double Costs for steps taken after the date of the Offer. However, the Offer must be genuine, and include an element of compromise.

Next, Justice Woolley explained that Costs may be enhanced where a party has “engaged in misconduct”, as set out in Rule 10.33(2)(g), but simply losing an Action is not evidence of misconduct creating a presumption of enhanced Costs. Here, the Defendants had argued that the Plaintiff engaged in misconduct when they it a novel argument which was ultimately unsuccessful. Her Ladyship found that this did not constitute misconduct, and that “losing a case summarily does not necessarily demonstrate misconduct by the unsuccessful party”. Her Ladyship also explained that, while it is sometimes appropriate to award Costs based on a percentage of legal fees incurred by a party, Schedule C is a useful tool for permitting parties to assess Costs risks in advance, and that arbitrariness “undermines the predictability … of law”. Her Ladyship also noted that Judges are not well-positioned to analyze the reasonableness of incurred legal fees. Through Rule 10.33, Schedule C may be adjusted based on principle, rather than arbitrarily. That being said, Justice Woolley also noted that without adjusting for inflation, “Schedule C risks becoming merely an artifact” and will not truly indemnify parties or discourage meritless claims.

Justice Woolley held that the Defendants’ Formal Offer to Settle was not a true compromise, and that it was not genuine because the matter was complex and the Offer was made before complex issues could be determined. However, Justice Woolley also concluded that Rule 10.33 warranted “some additional upward adjustment of the [Costs] claimed”, including the fact that the claim was for $18 million and the Plaintiff had recovered nothing; the importance of the issues to the Defendants; and the complexity of the Action. As such, Her Ladyship ordered that the Defendants’ Schedule C Costs be multiplied by 1.5.

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