Litigation is often a lengthy and costly experience for those involved in commercial disputes. Parties often assume that if they are successful, their entire legal fees will be paid for by the losing side. However, in Alberta that is the exception—not the norm.
In Alberta costs are always at the discretion of the Court. Therefore, caselaw developments and trends in the law of costs is an ever-developing and important area for the savvy litigant to keep on top of.
Since the release of the Alberta Court of Appeal’s decision in McAllister v City of Calgary, 2021 ABCA 25 (“McAllister”), many parties have argued that McAllister stands for the proposition that a reasonable and proper costs award should indemnify the successful party for approximately 40-50% of their actual solicitor-client costs, absent exceptional circumstances such as litigation misconduct. This is a shift from the traditional approach of calculating cost using the fixed tariff system in Schedule C of the Alberta Rules of Court, Alta Reg 124/2010 [Rules of Court], under which a party receives a specified amount for certain steps taken in the action.
However, in the recent decision of Grimes v Governors of the University of Lethbridge, 2023 ABKB 432 (“Grimes”), the Court of King’s Bench has pushed back on this interpretation of McAllister. In Grimes, the respondent, the Governors of the University of Lethbridge (“GUOL”), asked for 70% of its solicitor-client costs, being $18,813.70 plus disbursements. GUOL relied on McAllister, arguing that GUOL had been wholly successful and the applicant had rejected a reasonable offer to settle. The Court reviewed the history of the amendments to the Rules of Court, in particular, Schedule C, noting that when the “new” Rules of Court were updated in November 2010, no changes to Schedule C were proposed and that Schedule C had last been updated in 1998.[1] The Court noted that, at that time, the Alberta Law Reform Commission was concerned about over-indemnification of litigants, and were of the opinion that a fixed tariff best reflected the principle of partial indemnity and minimized problems encountered in other jurisdictions using different party-party cost systems. Although they recognized that Schedule C should be adjusted for inflation, the Alberta Law Reform Commission left this issue for future discussions.[2]
After the “new” Rules of Court were implemented in 2010, the Rules of Court Committee (the “Committee”) began to review Schedule C and made recommendations about inflationary adjustments to the values listed therein. However, the Committee’s recommendations did not change the underlying philosophy that there should partial indemnification using a fixed tariff as the norm. In 2014, the Committee issued their recommendation with respect to the adjustments to the values contained in Schedule C, which were incorporated in 2020. No increase was made to the inflationary multiplier in the intervening time. Therefore, the revised Schedule C was already five years out of date when it was updated.[3]
In Grimes, the Court found that before Schedule C was updated in 2020, Courts and litigants alike were frustrated with the dated tariff system due to increased inflation and litigation costs. Therefore, the decision in McAllister, which the Court described as having been decided before Schedule C was revised,[4] was, in the Court’s view, a stop-gap measure to the forthcoming Schedule C update, not a fundamental shift in how the Court approaches costs.[5]
The Court then conducted a review of Alberta caselaw and concluded that neither McAllister nor Barkwell v McDonald, 2023 ABCA 87 (which affirmed McAllister), created a new costs regime where partial indemnity based on actual solicitor-client costs was the new model. Rather, the Court found that Schedule C remains the presumptive method for determining costs, and departing from it requires exceptional circumstances.[6]
The Court went on to apply a 1.25 multiplier of the Schedule C amounts, based on the fact that there had been a 25% cost of living increase since 2014.[7] The Court did not find that there had been any misconduct in the action, or a complexity, that warranted a higher level of indemnity in the circumstances.
Although Grimes does not overturn McAllister, it drastically limits the application of McAllister and affirms the use of Schedule C as the appropriate method for indemnification of successful parties engaged in normal litigation.
Grimes has been cited in a number of reported decisions since its release, including:
- The Court departed from Schedule C and awarded solicitor client costs to the successful plaintiff where there was litigation misconduct and harassment on the part of the defendant in Ford v Jivraj, 2023 ABKB 465. However, due to the unusually low hourly rate used by counsel, the amount of full indemnity costs was close to Schedule C plus the 1.25 inflationary adjustment.
- The Court endorsed the use of the 1.25 multiplier applied in Grimes in Merchant Law Group LLP v Bank of Montreal, 2023 ABKB 597, however, the Court ultimately adopted McAllister and awarded a percentage indemnity lump sum award to the successful parties: 55% to Merchant Law Group LL and 75% to the bank, which represented enhanced costs due to two offers of settlement being made and rejected.
- In MYW v DTW, 2023 ABKB 467, the Court considered the issue of costs following a chambers’ application where the successful party argued that the Court’s reasons in Grimes were incorrect and should be considered unpersuasive. That party asked for a costs multiplier to be applied to Schedule C to account for alleged litigation misconduct. The Court opined that Grimes provided “a particular perspective” of McAllister and Barkwell, which may need to be clarified by the Court of Appeal. The Court ultimately found that the unsuccessful party had not engaged in misconduct warranting enhanced costs and awarded Schedule C, without applying a multiplier.
- In North v Davison, 2024 ABKB 52, the Court agreed with the analysis in Grimes and found that McAllister does not create a presumption of 40-50% indemnity for successful litigants, but rather that cost decisions remain contextual and discretionary. The Court found that enhanced costs were warranted in the circumstances because the defendants did not defend in a reasonable manner, and the issues were complex, and awarded Schedule C costs with a multiplier of 3.
- In Achor v Ihekweme, 2023 ABKB 606, the Court found that Schedule C with the inflation multiplier of 1.25 was appropriate as the plaintiffs had already been substantially indemnified by previous costs awards, which equated to approximately 40% of their solicitor-client costs.
- In Breen v Foremost Industries Ltd., 2024 ABKB 9, the Court found that the plaintiff / defendant by counterclaim had engaged in misconduct warranting exceptional full indemnity costs for one action and solicitor-client costs in the other. In order to ensure that there was not double recovery by the defendant / plaintiff by counterclaim, the Court reduced both amounts by 50%, and applied the Grimes25 multiplier to the Schedule C calculations.
It is clear that Grimes has been embraced and applied in subsequent Court of King’s Bench decisions as authority for awarding Schedule C costs plus a 1.25 multiplier in cases where there is no litigation misconduct or overly complex litigation. However, the partial indemnity model in McAllister appears to continue to be followed where the issues are complex, or where there are exceptional circumstances such as litigation misconduct.
Practical takeaways
- Parties litigating in the Court of King’s Bench should be prepared to make, or respond to, the principles articulated in Grimes in cost submissions.
- There is no presumption for 40-50% indemnity. Rather, the successful party will have to prove that there are exceptional circumstances warranting departure from Schedule C.
- If the case is appropriate for Schedule C costs, a starting point for assessment may be the Grimes inflation multiplier of 1.25.
- For parties seeking costs beyond what is provided in Schedule C, it may be helpful to provide a “bench mark” Bill of Costs calculated under Schedule C together with the Bill of Costs in the amounts actually being sought to allow the Court to compare.
Miller Thomson’s commercial litigation group is experienced in a variety of disputes and is always mindful of conducting litigation in a cost-effective and efficient manner. If you require assistance or advice in this area, please reach out to our legal team.
[1] Grimes at para 13.
[2] Grimes at para 16.
[3] Grimes at para 21.
[4] Notably, the amendments to Schedule C came into effect May 1, 2020. Although McAllister was heard on May 8, 2020, and the decision was issued on January 27, 2021, the court in Grimes took the position that McAllister had been decided prior to the amendments to Schedule C.
[5] Grimes at para 22.
[6] Grimes at para 65.
[7] Grimes at paras 88-89.
