GRAUPNER v PEILL, 2026 ABKB 593

Following an expedited Application concerning the enforcement of a restrictive covenant affecting a subdivision in Foothills County, the parties could not agree on costs. The Applicant sought enhanced costs, including partial indemnity solicitor-client costs and double costs based on an alleged settlement offer made before the hearing.

The Applicant succeeded in obtaining a permanent injunction preventing the Respondents from completing residential construction but did not obtain several other forms of relief, including damages and orders affecting third parties. The Applicant argued that a pre-hearing Settlement Offer justified double costs and that the Court should depart from Schedule C in favour of awarding a percentage of at least 75% (or 50%) of actual legal fees incurred.

Justice Jones held that the Settlement Offer did not justify a costs penalty against the Respondents. The offer did not comply with Rule 4.24 and therefore was not a Formal Offer to settle. The offer was not framed as a Calderbank offer and was not stated to be “without prejudice except as to costs”. Jones J. also noted that the offer did not indicate that double costs would be sought if the offer was not accepted. Although the offer indicated a willingness to agree to amendments to the restrictive covenant in exchange for payment, Justice Jones found this had little practical significance. The Applicant’s consent would have been necessary to amend the covenant, but not sufficient to permit construction because other property owners in the subdivision would also be stakeholders in any process seeking to amend the restrictive covenant. As such, the Court found that the offer did not support an award of double costs.

Turning to enhanced costs generally, the Applicant argued that the Court should depart from Schedule C because: (i) she did not receive a monetary award despite achieving success on her Application; (ii) Schedule C would not provide reasonable indemnification; (iii) the matter required an urgent hearing; and (iv) the value of the legal services provided, as reflected in her fees and disbursements, viewed in the context of the need for urgent resolution, justified a departure from Schedule C. Justice Jones noted that although it was unfortunate the Applicant did not receive monetary damages, that outcome did not justify the Court compensating for the absence of a monetary damages award through a Costs Award. The Court emphasized that costs and damages serve different purposes.

The Court reviewed the principles governing departures from Schedule C and emphasized that a party seeking partial indemnity costs must provide sufficient information to allow the Court to assess whether the claimed fees were reasonable and reasonably incurred. Justice Jones noted that percentage-based solicitor-client costs require the Court to consider the factors in Rules 10.2 and 10.33, along with the reasonableness, necessity, and proportionality of the legal fees incurred.

Jones J. found that an award based on a percentage of actual legal fees may or may not be appropriate but found that the record lacked sufficient information to determine that appropriateness and whether the Applicant’s claimed fees were reasonable or reasonably incurred. As such, the Court concluded that it was necessary for the reasonableness of the Applicant’s alleged legal fees and disbursements to be determined prior to proceeding with an award of costs.

Justice Jones denied the request for double costs and declined to determine the appropriate costs methodology on the existing record. Instead, Justice Jones directed a Review Officer to assess the reasonableness of the Applicant’s claimed fees and disbursements and provide a non-binding recommendation. The Court reserved its final costs determination pending that review.