Costs Today: Party and Party ... Solicitor and Client ... What?!

Costs have become so complex, and vary considerably from jurisdiction especially as concerns terminology. In Hamilton-Wentworth, the Ontario court summarized the law of costs as follows:

  • They are an award to be made in favour of a successful or deserving litigant, payable by the loser.
  • Of necessity, the award must await the conclusion of the proceeding, as success or entitlement cannot be determined before that time.
  • They are payable by way of indemnity for allowable expenses and services incurred relevant to the case
    or proceeding.
  • They are not payable for the purpose of assuring participation in the proceedings.

Normal or regular costs are often called just costs or party to party costs. These two terms are virtually synonymous. See Legal Definition of Costs and Legal Definition of Party to Party Costs.

Costs are awarded to a successful litigant and not to his or her lawyer.

Party and party costs are not an attempt to fully compensate a successful litigant for all their out-of-pocket fees and expenses. Usually, each court will present a printed list of compensation that a litigant may claim. In some jurisdictions, that list can be divided into matters of simple or difficult complexity, with more allowed per hour for those matters which are more complex. Thus, a litigant may hear a judge say "costs on scale C" and wonder what that means. It means that costs are allowed on the scale of "C"; for which the litigant must refer to the official cost scale of the Court. For example, tucked away behind the Supreme Court Rules of British Columbia as an appendice, is this:

"Where a court has made an order for costs, it may fix the scale, from Scale A to Scale C. Scale A is for matters of little or less than ordinary difficult. Scale B is for matters of ordinary difficult. Scale C is for matters of more than ordinary difficulty. The value for each (hourly) unit ... is Scale A — $60; Scale B — $110; (and) Scale C — $170."

Few lawyers work for $170 an hour so you can see the merit in the remark that costs do not nor are they intended to fully compensate a litigant for their actual out-of-pocket legal fees.

Such scales are also known as tariffs.

There is usually an enhanced version of costs which ousts the litigants from party to party costs and put them more into the realm of complete indemnification for the out-of-pocket reality of litigation. These increased costs sport the very legalese term of solicitor and client costs, a misleading reference to a higher scale that, by design but not necessarily in the result, purports to force the unsuccessful litigant to compensate the successful litigant in an amount equivalent to his actual out-of-pocket legal fees; hence, solicitor and client costs. Again, however, jurisdictions do not wish to legislate any lawyer's hourly rate so the reference is usually to a higher scale which is more in keeping with a lawyer's bill and without many of the limitations of party and party costs.

To this absolute mess, jurisdictions have used differing terms to refer to increased costs and have even added a further layer, either between party and party costs and solicitor and client costs, or in excess of solicitor and client costs.

Consider, in the context of the above, the term solicitor and own client costs, a legal term similar but not readily distinguishable from solicitor and client costs except for the word "own". Yet that one word means thousands of dollars to the unsuccessful litigant so if you hear it in court, make sure you heard right! For the significance of a ruling for solicitor and own client costs, see Legal Definition of Solicitor and Own Client Costs.

One court has even suggested that special costs, usually taken as synonymous with solicitor and own client costs, can even exceed a successful litigant's out of pocket legal fees, a severe form of punishment and to the litigation winner, a costs windfall! In such an extraordinary award, the court seeks to punish the unsuccessful litigant.

In Fullerton, the Court opined:

"The award (of special costs) must go beyond mere indemnity and enters the realm of punishment."

Or this from Justice Brenner of the BCSC in Foundation Company:

"[A] party is not entitled to recover costs equal or in excess of 100 per cent of its actual costs unless, because of another party's egregious conduct during litigation, the court considers it necessary to impose costs as a form of punishment or deterrence."

Whether to award costs or not are at a matter of judicial discretion. A variety of events might influence the court: the conduct of one party in the course of the litigation; whether the court felt that a party lied or exaggerated while giving evidence; and whether in the result, there really was a successful party as many judicial decisions come down in the middle or close enough to escape any award of costs (for a good discusion of circumstances that might sway a court from awarding costs to an otherwise successful party, see Huet v Lynch).

In a case I was involved in, I was partially successful only; the court ruled that "each party bear their own costs".

The rule of thumb:

"The general rule with respect to costs is ... costs of and incidental to a proceeding shall follow the event unless the court orders otherwise. The court maintains residual discretion to depart from the general rule if it is fair and appropriate in the circumstances of the case. The court however should not depart from this rule absent special circumstances, as a successful litigant has a reasonable expectation of obtaining an order for costs."

There are a few exceptions to the general rule that costs follow the event. There was a time when the courts seemed to be evolving away from awarding costs in family law matters; why spill gas on an smoldering emotional fire just doused by judgment? But this seems to have been reversed.

Sometimes, if a matter is considered novel or to be of great public significance (eg. Barclay v BC), the court will not make an award of costs because of the public interest in having the matter adjudicated once and for all.

A review of the cases on the law of costs shows that where a successful party has alleged fraud but has failed to prove it, he or she should not be granted an award of costs. Further, where a successful party has misconducted himself.

Costs are presented to the losing party in the form of a bill of costs; literally an invoice in the stilted style of lawyers, which sets out the style of cause, the scale and the hours being claimed and the detail of the eligible expenses.

If contested, the bill of costs is submitted to the court for resolution or sent to a referee or a lesser court such as a magistrate, registrar or master.

Many jurisdictions maintain specialized courts to deal with contested bill of costs which often do double-duty, adjudicating disputes between lawyers and their own clients when they disagree with a legal bill. Indeed, the process of such referees in the assessment and adjudicating of a lawyer's bill to his or her client, on the one hand, and of a bill of costs on the other, are both referred to as a taxation. Of course, as if the body of law in regards to costs needed further complication, bringing a lawyer's bill to assessment is called taxation as between solicitor and client, and assessing a bill of costs, taxation as between party and party!2

One area of bills of costs often hotly contested is expenses or disbursements. Some are indisputably incurred within the four corners of the litigation such as filing fees, fees for service of document and transcripts of examinations for discovery. But assessment officers are regularly asked to vet questionable expenses, such as hundreds of photocopies at $2 a page. Another is trying to get the loser of a lawsuit to pay legal research costs under the guise of a bill of costs. I have often seen a bill of costs contain a Westlaw or Quicklaw item that cannot be substantiated because in fact, the law firm pays a monthly amount for the service.

Only exceptionally should costs on a interim or interlocutory application be awarded because the merits of the action have not yet been determined. In BC v Okanagan, Justice Lebel wrote that in regards to interim costs, there are "three criteria of impecuniosity, a meritorious case and special circumstances".

Justice Macdonald wrote in Organ v Barnett:

"[T]he court does have a general jurisdiction to award interim costs in a proceeding ... limited to very exceptional cases and ought to be narrowly applied, especially when the court is being asked to essentially pre-determine an issue."

But that depends on the jurisdiction. Conversely, in Alberta, consider Rule 607 of the 2010 Alberta Rules of Court:

"Notwithstanding the final determination of an action, the costs of any interlocutory proceeding in that action, whether ex parte or otherwise, shall, unless otherwise ordered, be paid forthwith by the party who was unsuccessful on the interlocutory proceeding."

If you are self-represented or on legal aid, costs are still available to the winner although, in the event of legal aid, that entitlement may have been subrogated to the legal aid agency.

Many terms used in this article are further explained in Duhaime's Civil Litigation Law Dictionary.

REFERENCES:

See, also, Duhaime's Civil Litigation Law Dictionary.