"The purposes for which costs rules exist must be kept in mind in determining whether appellate intervention is warranted. In addition to indemnifying a successful litigant, those purposes have been described as follows by this Court: deterring frivolous actions or defences; to encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect; encouraging litigants to settle whenever possible, thus freeing up judicial resources for other cases; and to have a winnowing function in the litigation process by requiring litigants to make a careful assessment of the strength or lack thereof of their cases at the commencement and throughout the course of the litigation, and by discouraging the continuance of doubtful cases or defences."1
Thus was rationale of costs explained by the British Columbia Court of Appeal in 2011 (see, also, The Law of Costs).
This is a term often used in judgments as in "the defendant will pay costs."
Costs were not payable under the common law and required a statute to give the judges the authority to impose them; to add them to their judgments.
Costs are not a judgment that the loser pays the winner's legal fees. Legal fees are a private contractual matter between a lawyer and his/her client. Costs are, in part, in recognition of that reality but not otherwise associated. A person who does not have a lawyer is just as entitled to costs in the event that she or he is successful.
As Bouvier wrote in his American Law Dictionary under the caption of costs:
"They are distinguished from (attorney) fees in being an allowance to a party for expenses incurred in conducting his suit; whereas (attorney) fees are a compensation to an (attorney) for services rendered in the progress of the cause.
"A party can in no case recover costs from his adversary unless he can show some statute which gives him the right."
Because costs are not available unless there is a statute allowing it, a cost-awarding power is intentionally omitted from the jurisdiction of the presiding judge or officer of informal or simplified proceedings such as arbitration, small claims and some family courts.
In Johnstone v. The Law Society of PEI, Justice McQuaid of the Court of Appeal adopted these words to describe costs:
"... the sum of money which the court orders one party to pay another party in an action as compensation for the expense of litigation incurred. The definition continues to the effect that costs are awarded as compensation, (i.e. reimbursement); there is, unlike damages, no restitutio in integrum, that is to say, no concept in costs, as there exists in damages, that the injured person should be placed, insofar as money can do so, in the same position as he occupied before the injury was suffered".
A court can also condemn a losing party to solicitor and client costs or special costs but this is considered punitive as it would include the other side's lawyer bill.
In most states, the court has the final say on costs and may decide not to make an order on costs.
In Halsbury's Laws of England (2004):
"The court has discretion as to whether costs are payable by one party to another, the amount of those costs and when they are to be paid....
"A party has no right to costs unless and until the court awards them to him and the court has an absolute and unfettered discretion to award or not to award them. This discretion must be exercised judicially; it must not be exercised arbitrarily but in accordance with reason and justice.
"If a court does decide to make an order about costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party...."
Thus, the rule has been coined to costs follows the event which means that the court will usually order that the loser of the litigation pay the winner's costs.
In Copper v Smith (1884), Justice Bowen wrote:
"I have found in my experience that there is one panacea which heals every sore in litigation and that is costs."
In Jones v Monte Carlo, Justice Thesiger wrote:
"A judge ought to be severe in awarding costs when he finds that expenses have been incurred through a wrongful suppression of material documents."
A typical bill of costs may have two components:
The allowance against legal fees incurred usually based on a scale of complexity. For example, the unsuccessful party of a trial that lasted one day might list costs of $1,000 broken down into hourly units for preparation and trial; and
Expenses incurred by the successful party to defend or run his/her litigation including photocopy costs, legal research, postage and courier and court filing expenses.
- Bouvier, John, Law Dictionary (Boston: The Boston Book Company, 1987), page 447-448.
- Bacon, N., "Costs", published in Halsbury's Laws of England (London: Butterworths, 2004), page. 14.
- Callaghan v. Town of Montague, 195 Nfld. & P.E.I.R. 190 (2000), published at canlii.org/en/pe/pesctd/doc/2000/2000pesctd69/2000pesctd69.htm
- Copper v Smith, 26 Ch. 700
- Duhaime, Lloyd, The Law of Costs: Justice's Boogeyman
- Hartshorne v. Hartshorne, 2011 BCCA 29 [NOTE #1]
- Johnstone v. The Law Society of Prince Edward Island, 2 PEIR B-28 (1988)
- Jones v Monte Carlo, (1880) 5 QB 559