Introduction

In Alberta, parties engaged in litigation are entitled to recover “costs.” Costs are awarded to partially compensate parties for expenses incurred during legal proceedings. The primary purpose of a cost award is to indemnify the successful party for litigation-related expenses. Secondary purposes include: encouraging settlements; discouraging frivolous, vexatious, or harassing lawsuits; and promoting efficient and economical litigation.

Key Terms and Framework

The Alberta Rules of Court (“ARC”) outline the rules governing who is entitled to costs, when they apply, and how much can be awarded. Key terms and concepts include:

• Costs: Amount awarded by the Court to compensate the successful party for litigation expenses;
• Fees: Charges for lawyers’ professional services;
• Disbursements: Payments to third parties, such as court filing fees or courier services;
• Bill of Costs: Itemized list of the costs, fees, and disbursements sought to be recovered in the litigation;
• Schedule C: A tariff in the ARC setting out recoverable costs based on the litigation step and monetary amount at stake; and
• Other Charges: Other expenses incurred in relation to non-legal services.

When Costs Apply

The Court retains broad discretion in awarding costs.  Rule 10.29 of the ARC establishes the default rule that a successful party is entitled to costs unless a contrary ruling is made. Specific rules address unique scenarios, which may be the subject(s) of future articles.

Types of Costs

There are different types of compensation that may be awarded by a Court:

• Party and Party Costs: Partial indemnity for legal expenses. Designed to cover part of the successful party’s legal expenses;
• Solicitor-Client Costs: These provide partial indemnity to the successful party. These costs are higher than party and party costs and cover reasonable legal services;
• Solicitor and Own Client Costs: These costs, also known as full indemnity costs, are awarded in exceptional circumstances and are meant to fully compensate a party for their legal expenses;
• Enhanced Costs: These are higher than tariff costs but less than full indemnity costs. Enhanced costs are awarded in exceptional circumstances where the conduct of one litigant falls far short of what is expected from a responsible litigant;
• Punitive Costs: Where the conduct of the party against whom they are sought is described as scandalous, outrageous, or reprehensible. They are intended to sanction/deter bad behaviour related to the litigation and are awarded in exceptional cases;
• Costs Against Solicitor Personally: A lawyer may be ordered to pay costs, if they engage in serious misconduct that undermines the authority of the courts or interferes with the administration of justice. Awarded in exceptional circumstances; and
• Costs Against the Crown: Although rare, costs may be awarded against the Crown in exceptional circumstances involving serious misconduct by its agents.

Court Considerations

When determining costs, Rule 10.33 of the ARC allows the court to assess factors like:

• The result of the action and the degree of success of each party;
• The amount claimed and the amount recovered;
• The importance of the issues;
• The complexity of the action;
• The apportionment of liability;
• The conduct of the parties that tended to shorten the action; and
• Any other matter related to the question of reasonable and proper costs that the court considered appropriate.

In Practice

Cost awards in Alberta’s litigation system aim to mitigate financial burdens while promoting fair and efficient resolutions. Litigation costs are typically awarded on a partial indemnity basis, guided by Schedule C of the ARC. Adjustments may be made in specific circumstances, such as unaccepted settlement offers, including Formal Offers.

The Court retains ultimate discretion over costs, even when written agreements stipulate specific terms for cost recovery. This flexibility gives the Court to award costs that are fair, reasonable, and consistent with principles of fundamental justice.