By Daniella Marchand, Alberta Legal Coach
One of the most common questions at the end of any legal case is: who is responsible for covering the costs? It's a concern that underscores the financial burden of legal proceedings, where lawyer fees, court costs, and other expenses accumulate quickly. However, the courts have the discretion to offer some relief in the form of court-ordered payments. Known as 'costs awards,' these payments aim to relieve the successful party from the financial burden of the litigation. Despite their importance, costs awards can be easily overlooked when preparing for a hearing or trial. In this blog, we will delve into the significance of legal costs, exploring what they are, how they work, and why they shouldn't be ignored.
What are court costs?
“Court costs" refer to the expenses incurred in a legal proceeding. These expenses can encompass a wide range of items related to the litigation process, including:
- Legal fees - charged by lawyers or legal professionals for their services, including consultation, document preparation, representation in court, and legal advice.
- Court fees - legal proceedings often require the payment of various court fees, including filing fees for initiating a lawsuit, fees for submitting documents, and fees for court services.
- Disbursements - disbursements are out-of-pocket expenses incurred by lawyers on behalf of their clients. They can include expenses for photocopying, courier services, postage, court transcripts, and other administrative costs associated with the case.
- Expert witness fees - if expert witnesses are called to provide testimony in a case (i.e. forensic accountants, medical experts, engineers, etc.), their fees and expenses are typically included in the costs.
- Court reporter fees - if court reporters are used to transcribe proceedings or depositions, their fees may be part of the costs.
It's important to note that costs in law can vary significantly depending on the complexity of the case, the length of the legal proceedings, and other factors. The allocation of costs (who pays them and how they are apportioned) can also be subject to court decisions and legal rules.
Who is entitled to receive court costs?
The principle of awarding costs to the successful party in legal proceedings serves several important purposes within the legal system. Here are some of the key reasons behind this practice:
- Fairness and compensation – this is a foundational reason for awarding costs. It recognizes and helps to compensate the successful party for legal fees and expenses incurred in court. By doing so, awarding costs offers a measure of predictability within the legal system. It allows parties to better assess the potential financial implications of their actions, aiding in informed decisions regarding settlement, negotiation, and litigation strategy.
- Encourages settlement - the possibility of recovering legal costs can serve as an incentive for parties to engage in settlement talks and negotiations. Being aware that they may be held liable for the other party's expenses if they lose at trial encourages litigants to weigh reasonable settlement offers more carefully. This, in turn, can expedite the resolution of disputes.
- Deters frivolous claims or defenses - awarding costs to the successful party can serve as a deterrent against pursuing frivolous or unmeritorious claims or defenses. Knowing that they could be responsible not only for their own expenses but also the other party's costs if they are unsuccessful may give individuals pause before pursuing a weak case.
- Promotes efficiency - awarding costs encourages the efficient use of court resources. By making parties aware that they could be liable for the other side's expenses if they lose, costs can help keep the attention on key issues, minimize unnecessary delays, and foster responsible litigation conduct.
- Legal accountability – court costs are also a way of holding the parties accountable for their actions during the litigation process. If a party engages in unreasonable behaviour, abuses court procedures, or refuses reasonable settlement offers, they may be more likely to be ordered to pay the other party's costs on a solicitor-client basis, which is a higher level of costs.
Types of Costs
Schedule C Costs
Schedule C costs are a specific set of legal costs laid out in a schedule appended to the Alberta Rules of Court. Aimed to be awarded by the court in certain types of legal proceedings, these costs serve as a standardized framework for allocating legal fees, providing predictability in various kinds of litigation. Schedule C costs are not intended to award a party the full amount of their legal fees and expenses, but rather provide a predictable portion of these costs.
It's important to note that the specific amounts of Schedule C costs can vary and are subject to court discretion. The court may consider factors such as the complexity of the case, the conduct of the parties during the litigation, and the reasonableness of the legal fees when determining the amount of Schedule C costs to be awarded.
Party-to-party costs refer to a category of legal expenses that one party may be ordered to pay another as part of the litigation process. These costs are usually associated with the legal fees and expenses of the prevailing party — the one who has received a more favourable outcome or is deemed most successful. While they are generally higher than amounts awarded under Schedule C, they are not intended to fully reimburse the legal expenses incurred during the application or trial. Party-to-party costs usually cover between 40% to 50% of a party's fees. The court exercises discretion in determining the amount to be awarded, considering factors such as case the complexity of the case, conduct of the parties, and the reasonableness of the legal fees.
Solicitor-client costs are distinct from the other types of costs as they are typically awarded to compensate a party for the full amount of the legal expenses incurred in the legal action. Below are some key characteristics of solicitor-client costs:
- Full reimbursement - solicitor-client costs are intended to fully reimburse a party for all reasonable legal fees and disbursements incurred during the legal proceedings. This includes not only the costs that are typically recoverable under party-to-party costs but also additional costs, such as those incurred due to the other party's misconduct or unreasonable behaviour.
- Punitive or deterrent element - solicitor-client costs can have a punitive or deterrent element. They may be awarded by the court when the actions of the opposing party or their legal representative are deemed to be particularly egregious, vexatious, or in bad faith. The purpose is to discourage such conduct.
- Exceptions - solicitor-client costs are awarded in exceptional cases, and they are not routinely granted. Courts typically consider factors such as the nature of the case, the behaviour of the parties, the reasonableness of the legal fees, and the overall circumstances when deciding whether to award these costs.
- Legal misconduct - solicitor-client costs may be awarded when there is evidence of serious misconduct by the opposing party's legal representative, such as unethical behaviour or abusive litigation tactics.
- Indemnification - solicitor-client costs serve as a form of indemnification for the party seeking them, compensating them for the financial burden imposed by the litigation.
Court Discretion in Determining Legal Costs
Ultimately, the court has the discretion not to award costs to either party in a legal proceeding, or to award a higher amount of costs if there are factors to do so. There are several reasons why the court’s ability to award costs is discretionary.
- Mixed successes - if a case ends in a way that does not clearly establish one party as the “winner” or “loser”, the court may choose not to award costs to either party. This can happen in cases where the outcome is somewhat mixed or where both parties achieve some of their objectives.
- Settlement offers - if one party makes a reasonable settlement offer, and the other party refuses it and then fails to achieve a better outcome at trial, the court may consider awarding solicitor-client costs.
- Party's conduct - if a party has engaged in misconduct, vexatious litigation, or has acted unreasonably throughout the proceedings, the court may exercise its discretion to impose a punitive costs award against that party.
It's essential to understand that the court's decision regarding costs is discretionary and can vary based on the specific facts and circumstances of each case. Parties involved in legal proceedings should be aware of the potential for costs consequences and seek legal advice from their own legal counsel to understand the rules and expectations regarding costs in their particular jurisdiction and case.
Double Costs – Calderbank Offers
The issue of costs may come up before your trial even occurs as parties may send or exchange settlement offers ahead of trial in an attempt to resolve the issues between them. To make these offers more persuasive they may add a ‘cost consequence’. Often these offers state that if the party offering receives a better outcome at trial, they will present the offer to the court to seek a greater amount of costs from the other party. This is known as a Calderbank offer.
The purpose of a Calderbank offer is to encourage settlement by allowing a party to make a compromise offer that includes specific terms and conditions.
A Calderbank offer is a conditional offer that has a cost consequence attached to it. Typically, if a Calderbank offer is accepted, any scheduled hearing or trial will no longer be necessary, which means that both parties will have saved the costs of having to attend that appearance. If the Calderbank offer is rejected, any scheduled hearing or trial will typically still need to proceed as planned. However, if the party who made the Calderbank offer achieves a better outcome at that hearing or trial, they may be entitled to enhanced costs. If the matter does go to Court, the contents of the Calderbank offer are usually kept confidential between the parties until the court has made its decision. This allows parties to negotiate without the pressure of it being used against them in litigation.
One of the significant features of a Calderbank offer is that it may have costs consequences. If the party receiving the offer rejects it and ultimately obtains a less favourable outcome at trial or a hearing, the court may order them to pay a higher level of costs to the offering party.
Parties use Calderbank offers strategically to achieve a favourable outcome while minimizing litigation costs and risks. It allows them to put pressure on the other side to settle on reasonable terms.
In summary, the allocation of costs and the extent to which they are awarded are subject to the court's discretion. Various factors come into play, such as the reasonableness of any settlement offers, the behaviour of the parties involved, and the final outcome of the case.
Self-Represented Parties and Costs
As a self-represented litigant, you're not automatically excluded from being awarded legal costs. However, several key factors come into play. First and foremost, the court has discretion in this matter, evaluating aspects like the merits of your case and the behaviour of all parties involved. Reasonableness also figures into the equation - your expenses should align with the scale and complexity of the case. Therefore, it's really important that you document your costs meticulously.
It's important to consult with legal professionals, such as a lawyer or legal coach, to understand the rules and procedures regarding costs recovery in your specific jurisdiction and case. They can provide guidance on whether you may be eligible for costs and how to navigate the legal process effectively. Keep in mind that costs recovery can be complex, and legal advice is valuable in maximizing your chances of obtaining a favourable costs award. If you're facing the intricate landscape of legal costs, don't go it alone—schedule your free 20-minute consultation with one of our legal coaches at Coach My Case to receive personalized guidance tailored to your needs today.