In Ontario, a successful party to civil litigation is entitled to a reasonable expectation that it will receive an order for payment of its costs unless there are special circumstances. This does not mean that the successful party will necessarily be awarded costs though.
What Are Costs?
Costs are defined as the legal fees the party incurred, plus H.S.T. and disbursements. Costs are in the discretion of the court, which may determine by and to whom costs are payable and in what amount.
Factors the Court Considers in Exercising Discretion to Award Costs
In exercising this discretion, the Court will consider the non-exhaustive list of factors listed in Rule 57.01 of the Rules of Civil Procedure. The factors include, but are not limited to:
- The result of the proceeding;
- The amount claimed and the amount recovered in the proceeding;
- The principle of indemnity;
- The apportionment of liability;
- The complexity of the proceeding;
- The importance of the issues;
- Conduct that unnecessarily lengthened the proceedings;
- Any improper, vexatious or unnecessary steps taken on behalf of the party claiming costs;
- Any refusal to admit something that the party claiming costs should have admitted;
- Whether the proceeding involved a novel issue in law.
In general, these factors relate to the nature of the issues in the litigation, the result and the way a party behaved in the ligation.
Improper Considerations
In Przyk v Hamilton Retirement Group Ltd., the trial judge refused to award costs to the successful party in an eldercare negligence case because:
- It was a novel area of law;
- The Defendant was insured and was defended by an insurer with lots of resources so it created a “David and Goliath situation”; and,
- The insurer never made an offer to settle before trial other than a no-costs dismissal of the claim, which was an example of the insurer’s arrogant, “hardball” approach, which is unfair to litigants of modest means and inconsistent with the insurer’s “social responsibility”.
The Ontario Court of Appeal recently held that the fact that the Defendant was insured and defended by an insurer was not a reason to deny an award of costs. Neither the existence of insurance in favour of a successful party at trial, nor the fact that the successful party was better resourced than their opponent, is a justification for denying costs where the resource advantage has not been used to engage in abusive tactics or other misconduct during the litigation. The relevant consideration is not the existence of resources, but how the resources were used in the civil litigation.
It is wrong, said the Court of Appeal, to presume that a plaintiff with a modest claim against an insured defendant is necessarily in a David and Goliath situation without examining the particular circumstances of that particular case. Proceedings should not be stereotyped.
The Court of Appeal also held that the refusal of a party to offer a financial settlement before trial is also not a reason to deny that party costs, especially where the refusal is proven reasonable by the verdict.
Finally, the Court of Appeal held that it was improper for the trial judge to have sought to correct a general attitude of Aviva toward settlement in other cases by his cost award in that particular case.
Ultimately, however, the Court of Appeal upheld the trial judge’s refusal to award costs on the basis that the proceeding involved a novel area of law. Novel issues arise where there is uncertainty in the law or where the facts make the guidance provided by prior cases inadequate. A novel issue that involved the public interest, said the Court of Appeal, can support a no costs order as an exception to the general approach that a successful party will receive their costs.
Interestingly, no costs were awarded for the appeal.
Awarding Costs
Although there is a reasonable expectation that the successful party in civil litigation will be awarded costs, it is not a hard rule. A judge may deprive a successful party of costs, or even order the successful party to pay costs, as long as the exercise of discretion to do so is not tainted by errors of law or principle, or does not result in a decision that is plainly wrong because it is based on irrelevant factors and overlooks relevant ones.
To learn more about cost awards, speak to one of our civil litigation lawyers at Richardson Hall LLP.
