The Alberta Court of Appeal's recent decision in McAllister v. Calgary (City), 2021 ABCA 25 dealt with awarding costs to a successful litigant at trial. The facts of McAllister, while interesting, are not overly pertinent to the issue of costs, although the Court of Appeal did refer to the action as "a protracted piece of litigation" [para 3].
Mr. McAllister was successful at trial and was awarded costs by the trial judge in an amount that represented only 17% of the total legal fees he incurred. On appeal Mr. McAllister argued the costs award he received was not reasonable because it did not provide him with a sufficient level of indemnification for the costs he had actually incurred in prosecuting his action.
The trial judge quantified Mr. McAllister’s costs using the Tariff of Recoverable Fees (or Schedule C) of the Alberta Rules of Court without regard to the actual legal costs incurred by Mr. McAllister. Schedule C provides for costs based on itemized steps in a litigation and assigns a fee value for each step taken based on the amount of the judgment. Mr. McAllister incurred a significant amount of legal fees throughout this lengthy litigation. As the successful party in the action, Mr. McAllister believed he should be indemnified to a greater degree than that which was provided in Schedule C. The trial judge's view, however, was that Schedule C was the proper approach to awarding costs at trial.
Mr. McAllister successfully appealed the trial judge's decision. In siding with Mr. McAllister, the Court of Appeal took issue with the trial judge's approach to awarding costs and disagreed that Schedule C should be the de facto approach. The Court of Appeal said that Schedule C is but one of several options available to the court in awarding costs to a successful party. The Court of Appeal noted that awarding a percentage of assessed costs is expressly authorized by the Rules of Court.
The Court of Appeal held that in Alberta, costs granted at trial will typically represent 40-50% of a successful party’s actual costs. In support of this position, the Court of Appeal referenced several other appellate level decisions including Hill v Hill, 2013 ABCA 313 [Hill], where the Court of Appeal further elaborated on the 40-50% of costs rule: “… party-party costs are not plucked out of the ether; they are designed to be somewhere around half a reasonable legal bill, or a little under. And Schedule C does not bind a judge in any respect, and is not even presumed correct”[McAllister at para 42; Hill at para 11]. Of course, this rule is not completely unfettered and may require an assessment of what is reasonable in terms of the legal fees incurred.
In summary, McAllister recognizes that there are instances where Schedule C fees will be inadequate and moves away from the general rule that costs should be awarded on a party and party basis and that, absent misconduct, the amount awarded at trial should approximate 40-50% indemnity of a winning party's actual costs. The option of awarding costs on the basis of 40-50% indemnity is of course subject to the reasonableness of legal fees charged to the successful litigant.
What does this mean for you?
Although costs are always at the discretion of the court, using 40-50% indemnity as a general rule or guideline is a welcome concept to successful litigants. It is important to note that McAllister dealt with costs awarded at trial. It is unclear whether this same principle will be applied to costs awarded at interlocutory applications. A litigant might keep this in mind when deciding whether to deal with costs arising from interlocutory applications immediately following the application as opposed to leaving costs to be determined at trial where indemnification might be greater.
If you have questions about a costs awards in litigation, please contact Catriona Otto-Johnston, Partner, or Joree Nelson, Associate, at Rose LLP for further information.
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