Show Notes:

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Lecture Slides:

Welcome everyone this is Amer Mushtaq from YouCounsel.

In today’s lecture we’ll talk about Rule 57 of the Rules of Civil Procedure in Ontario.  This Rule deals with award of costs in the proceeding.  As you know, a proceeding could be a court action or an application in the civil courts in Ontario. 

We start with our disclaimer that this lecture is not legal advice.  If you have any specific questions you should contact a lawyer or a paralegal or contact the Law Society of Ontario for a referral.

What are costs in a proceeding?  There are two components to cost in the proceeding. (1) is lawyers’ fees.  If you have retained counsel either for the entire case or partially for the case you may have incurred legal fees from the lawyer and you may be entitled to recover those legal fees from the other side if you’re successful. 

(2) The second component of costs are disbursements.  These could be mediator fees, investigation fees (if there was an investigation conducted), copying, binding and faxing charges, court fees for issuing the claim, filing the defence and bringing a motion.  There are fees for different steps in a court process. You may have paid those fees into the court—attendance money for witnesses all these kind of out-of-pocket expenses are considered disbursements.

There are three types of costs award. (1) First one is called full indemnity, which as I noted here, is extremely rare.  Full indemnity what it means is that assuming that for as an example you have incurred $60,000 in total cost—which includes your lawyer fees, disbursements and taxes and you’re asking the court that because you’re successful in your case you want the other party or parties to pay you in addition to the damages the entire $60,000 of your cost. 

It is very rare in Ontario—extremely rare in Ontario that the court will award full indemnity on a case.  In fact, in my 10 to 11 years of practice, I have never seen a case where the court has awarded full indemnity.  Whatever you spend you’re not expecting to recover all of it in legal fees and disbursements even if you are successful.

(2) The most common type of cost award is called partial indemnity.  To explain it to you in very simple terms: you are expecting to recover about 35 to 50 percent (around that percentage) of the actual fees that you have incurred.   If you have incurred $100,000 as the actual legal fees and disbursements, you can potentially recover 30-35 or up to 50 thousand dollars generally on a partial indemnity scale.  In other words, you’re not recovering the full cost that you have actually incurred on your case.

(3) The third kind of award is called substantial indemnity, which is higher than partial indemnity.  In this case you are expecting to recover about 75 to 80 percent of your actual cost.  Based upon the cost awarded, you can imagine that the cost award is quite important.  Let me explain to you this by way of an example. 

Imagine that you fought a case where you were claiming about $30,000 in damages.  To fight this case and take it all the way to trial you retain counsel. And your total fees for a three to five days trial in Ontario or in Toronto would be approximately $60,000.  This is a realistic number—if you start a case in Ontario, in the Superior Court of Justice and you take it all the way to trial and you complete a trial (which is three days or a little bit longer), it is reasonable to expect that you will incur about $60,000 in legal fees.  Let’s take this scenario in which the court agrees to award you the entire amount of damages.  You get full $30,000 but for some reason the court does not agree to award you any costs.  The outcome of this case is that you are literally out of pocket by $30,000—even though you were successful and got full damages. 

As you can see the importance of cost of award is very obvious.  You want to fight a case and you want to win a case in a way that you are successful in obtaining a judgment or not getting a judgment against you if you’re a defendant—at the same time you are not substantially out of pocket for continuing this fight. 

You have to be very careful about the cost in a proceeding because we as lawyers know that a lot of times it is the cost that drives the litigation. For example, if we are involved in a case which is $30,000 or $50,000, we are always worried about what are the costs of that proceeding at certain point and how it can play a role in our client or the other side deciding whether the case is worth continuing or whether a settlement may be a better option. With that in mind comes this option of Rule 49 which is in the Ontario Rules of Civil Procedure. It talks about how to strategically make offers to settle so that you can benefit better—even if you continue a court fight for an amount that is not substantially very high.  Because the topic is important, I will provide details of Rule 49 in a separate lecture. 

Coming to Rule 57 in the Rules of Civil Procedure of Ontario which deals with costs.  The first thing you want to remember about cost award is that it is usually awarded after each step in a proceeding or after trial.  If you have brought a motion or you are dealing with a motion, defending a motion within your action, at the end of that motion the court will generally award cost to the successful parties.  It also happens sometimes that the court may reserve the cost award to the trial judge, but usually the motion judge or the motions master will award cost to the successful party after each step.  Obviously, at the end of trial the successful party usually gets cost award in addition to the judgment.

The key principle that you want to remember about cost award is that it’s at the discretion of the court.  That’s one thing that you want to carry from this lecture—that it is the discretion of the court to award cost and whatever the Court finds that this should be an appropriate cost that is what the court is going to award and what you want to remember is that because it’s the discretion of the court it is very rare that if you appeal a cost award it may be changed or overturned by an appellate court.  

Because of the discretion of the court whatever the judge or the master has decided that will usually remain the cost award in your proceeding.  Now usually cost is awarded to a successful party and I say usually—but it is possible for the court to award cost against a successful party. Rule 57.01 (2) specifically allows the court to award cost against the successful party.  You want to keep this in mind because I have seen cases where a party was successful, they won the case got the judgment in their favor and yet because of their conduct during the action or because of the factors that the court considers in awarding cost the court actually awarded cost against the successful party it doesn’t happen that often but it is possible so even if you’re successful you want to be careful about how the cost award is going to play out in your specific proceeding.

What are some of the factors that court considers in awarding costs?  It’s under Rule 57.01(1). 

One factor is lawyer’s experience/rates, hours: the lawyer that you’ve retained how experienced that lawyer I; what are the rates that the lawyer charges; and how many hours the spent on your case. 

Another factor is ability of an unsuccessful party to pay.  It is a factor—just because you cannot pay the costs, does not mean that the cost will not be awarded against you.  But it is one factor that the court will take into account—whether you have the ability to pay costs and what is your ability to pay “cost” amount?  

Amount claimed and recovered: this is an important factor.  It was at issue in one of the recent cases in cost award.  If you have claimed $20,000,000 in a case and you recover $20,000, do not expect that the court is going to award you significant costs—because you have claimed a hugely exaggerated amount—whereas the actual recovery was a small fraction of that.  This is something to consider when you’re making those claims you want your claim amounts or monies to be somewhat realistic of what you can potentially recover. 

Complexity of the case, complexity of the issues is also a factor when the court is considering the award of cost. 

Importance of issues: if you brought a court action which is not only helping you in succeeding in whatever you’re claiming but it is also beneficial to the larger public (it could be a public issue), then the court will consider that when awarding costs.  In circumstances where you commence the court action which was in public interest and even if you were not successful the court may take that into account in deciding that you may not have to pay significant costs because you raised an issue that was helpful to the public at large.

Conduct of parties: this is a very important factor and the courts do consider this very seriously in deciding what are the appropriate costs.  To understand this matter: if a party acts inappropriately or unreasonably in the conduct of an action – not just at trial but from the time the action was commenced to the time it goes to trial – if one party for example takes steps that unduly delay the proceeding to move forward, brings motions that are unwarranted just to cause trouble to the other side, just to make it financially difficult for the other side to continue the litigation, then all of those factors are considered at trial and the court may because of the conduct of a specific party award costs a bit heavily against that party.  Conduct of parties is important.

 Refusal to admit: if one party has asked the other party / submitted a request to admit and asked for certain facts that are not controversial or even if they’re controversial but they believe (one party believes) that those facts were true, the other party can submit or serve a Request to Admit and if the second party refuses to admit those requests then there could be consequences to that. This is also an important topic strategically in a court action and I’ll have a separate lecture on refusal or request to admit. There could be any other matters that the court believes that should play a role in deciding what are appropriate costs and the court will take that into account in awarding costs.

In conclusion, the main thing you want to keep in mind is that you always want to carefully consider cost consequences because costs play a significant role in how the overall outcome of your case is going to take place.  You have to take steps and implement strategies so that even if you are successful there are no negative cost consequences to you or even if you’re unsuccessful you are managing the cost consequences to the minimum.  Similarly you want to implement strategies so that not only that you get highest damages or get the case thrown out against you if you’re defending it, but you’re able to get highest cost award so you’re not financially disadvantaged at the end of trial.

Hopefully this gives you some understanding of a cost award. I will at the next lecture talk about Rule 49 “Offers”, so that you can get an overall perspective on cost and how to play with cost strategies in your proceeding.

Thank-you for watching.