10.29: General rule for payment of litigation costs
10.31: Court-ordered costs award
10.33: Court considerations in making costs award

Case Summary

Merchant Law Group LLP (“Merchant LLP”) held a bank account with the Bank of Montreal (“BMO”). The Government of Alberta (“Alberta”) issued a Requirement to Pay (“RTP”) to BMO in relation to a debt owed by Merchant Law Professional Corporation, one of the partners of Merchant LLP. Merchant LLP asserted that the bank account belonged to Merchant LLP and that Alberta could not enforce the debt of a partner against a partnership. BMO sought Interpleader relief and asked to pay the disputed funds into Court, which was granted on November 29, 2018 (“Interpleader Decision”). Merchant LLP appealed the Interpleader Decision, which was dismissed by the Alberta Court of Appeal (“ABCA”) and remitted to the Alberta Court of King’s Bench to determine several issues arising from the Interpleader Decision. On February 8, 2023, Armstrong J. rendered a Decision on the five questions that the Alberta Court of Appeal remitted. Merchant LLP, BMO and Alberta then applied for a determination of Costs arising from the Appeal and subsequent Application addressing the remitted questions.

Justice Armstrong noted that the Court is required to consider the factors set out in Rule 10.33(1) in making a Costs Award, but that once the enumerated factors are considered, the Court has considerable discretion in fashioning a Costs Award pursuant to Rule 10.31. Further, while the Court may refer to Schedule C of the Rules in determining reasonable and proper Costs, as the Court of Appeal held in McCallister v Calgary (City), 2021 ABCA 25, a fair and reasonable Costs Award should generally provide a level of indemnification in the range of 40% to 50% of Costs reasonably incurred by the successful party.

The Court held that because BMO was successful on Appeal, BMO was presumptively entitled to Costs pursuant to Rule 10.29. BMO was also successful on the subsequent Application on the Interpleader question, which was the only question BMO had interest in. The Court took issue with Alberta and Merchant LLP requiring BMO to continue to participate in the Action once it had successfully applied for Interpleader relief since the sole issue was whether Alberta or Merchant LLP was entitled to certain funds paid into Court. The Court reviewed BMO’s draft Bill of Costs and determined that BMO was entitled to approximately 55% of the actual fees incurred. However, because BMO had also made offers to Merchant LLP and Alberta that would have allowed for a more efficient and cost-effective means of resolving the issues in dispute, which were declined, Armstrong J. held that BMO was entitled to enhanced Costs of 75% indemnification of actual fees incurred.

Merchant LLP was also entitled to Costs, as Merchant LLP was successful on the issue of entitlement to the money that was paid into Court. Merchant LLP sought full indemnity of $111,639.01. Justice Armstrong held that this was not reasonable and proper in the circumstances as the legal fees were disproportionate to the amount of money at issue and the complexity of the case. Further, Merchant LLP was providing legal services to itself. The Court held that reasonable and proper fees for the Application for Merchant LLP would have been $30,000. Unlike BMO, Merchant LLP was not entitled to enhanced Costs as there was no misconduct or unreasonable behaviour that would warrant this Order. Justice Armstrong concluded that Merchant LLP was entitled to a 55% level of indemnification, totalling $16,5000 in Costs.

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