Legalese: Counting the cost

There is a common misconception that a party losing a lawsuit must pay all of the legal fees paid by the winning party. This is most often very far from the truth. The issue of court costs is provincial in nature (unless you are involved in a case in federal court or some other federal tribunal), and will therefore vary from province to province, but the fundamental aspects involved in the awarding of court costs are similar.

Since every case is different, there is no way to ever guarantee how the issue of court costs is going to be resolved.

In some circumstances, a court could award costs in favour of the losing party. This does not often occur, but a court would have the ability to make such an order. More common is a situation where the court declined to award any costs at all to a successful party, and simply ordered that each party bear its own legal costs. That could happen in a situation where the court felt that the opposition to the claim was rational, the amount in dispute was low and the conduct of the plaintiff was less than exemplary.

In Manitoba, the factors which the court may take into account in considering the issue of costs are set out in section 57 of the Court of Queen’s Bench Act. Section 57.01(1) reads “In exercising its discretion under section 96 of The Court of Queen’s Bench Act, to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle made in writing, (a) the amount claimed and the amount recovered in the proceeding; (b) the complexity of the proceeding; (c) the importance of the issues; (d) the conduct of any party which tended to shorten or lengthen unnecessarily the duration of the proceeding; (e) whether any step in the proceeding was improper, vexatious or unnecessary; (f) a party’s denial or refusal to admit anything which should have been admitted.”

Most provinces have a “tariff” of costs; in other words, a schedule which sets out the costs which will normally be awarded to the winning party for each stage of a lawsuit. For example, in Manitoba, winning parties will normally be awarded a certain amount for the preparation of the statement of claim, as well as a per diem for every day spent in examinations for discovery and trial. The amount varies, based upon the amount at issue in the lawsuit.

The extent to which the tariff costs actually compensate parties for their out-of-pocket legal expenses is usually quite low. In my experience in Manitoba, the tariff costs usually approximate between 20 and 30 per cent of the actual legal costs paid by a litigant. This factor is important for companies and individuals who plan on becoming involved in litigation. You must realize that even if you are totally correct in your legal position, and eventually win the case, you more than likely will not be awarded costs in an amount equivalent to what you actually pay to your counsel.

“Solicitor and client costs” are awarded in rare circumstances where the conduct of a party is particularly egregious. It means that you would be awarded all of the money that you actually paid to your legal counsel. If an insurance company were to deny a purely legitimate claim, refuse to produce documentation and fail to cooperate in the discovery process, that would be a good example of a case where a court may be inclined to award costs on a solicitor/client basis. It would not be generally advisable for any party to ever expect that solicitor/client costs will be awarded.

In addition, simply because you are awarded court costs does not mean that the other party will in fact pay those costs to you. The court costs awarded will form part of the judgment or order of the court. It remains up to you to collect that order. If the other party does not have assets or income to pay, then it is possible that the order will remain unsatisfied.