Written by Jack Stout, Student-at-Law, and Shad Chapman, Lifetime-Learner-at-Law, at Brownlee LLP
In the Alberta Court of King’s Bench decision in Grimes v Governors of the University of Lethbridge, 2023 ABKB 432, Justice Graesser looks at the trend towards increasing party costs to be based on a percentage of the winning party’s actual fees and the decision in McAllister v Calgary (City), 2021 ABCA 25. Justice Graesser’s decision suggests that those claiming that the Bench is moving away from Schedule C are prematurely and incorrectly coming to that conclusion. He also creates a 1.25 costs multiplier that could have a large impact on costs awards going forward.
Mr. Grimes was suspended from the University of Lethbridge following a series of communications involving a professor he was unhappy with. Grimes’ appeal of the decision was dismissed by the University’s Board of Governors. Grimes then applied for judicial review of the University’s decision. Prior to the judicial review going ahead, the University made a Calderbank offer that Grimes rejected (note: a decision to reject a Calderbank offer is one which a court can consider when awarding costs). The judicial review upheld the University’s decision and did so overwhelmingly in the University’s favour. Submissions were made for costs which led to the decision covered below.
In their submissions for costs, the University argued that they should get 70% of their solicitor-client costs (the actual fees their paid their lawyer) based on a variety of factors that Justice Graesser summarized as follows:
1. The University’s counsel wrote [Grimes] on September 8, 2022 offering to accept a discontinuance of the Application without seeking costs against the Applicant;
2. It encouraged [Grimes] to get legal advice;
3. The University was entirely successful – it was not a “close case”;
4. The Application dealt with an important issue, which was finally resolved;
5. The University was obliged to fully defend the Application;
6. The Application had no basis for success; and
7. Rule 1.2(2)(c) encourages early settlement, and [Grimes] rejected a reasonable Calderbank offer.
The University’s argument that they should receive a certain level of indemnity centred around these factors and the decision in McAllister v City of Calgary, 2021 ABCA 25. In addressing the University’s argument and interpreting McAllister, Justice Graesser contextualizes the decision. The McAllister decision was delivered right before the Schedule C Costs amounts had been updated for the first time in 12 years. Noting that, Justice Graesser interprets the McAllister decision as more of a “stop-gap” rather than a change of principle in the law around costs (22). The McAllister decision was made in the context of yet-implemented recommendations from the Rules of Court Committee and other parties involved in the update in 2020-21. With this in mind, he summarizes the caselaw surrounding costs with particular attention paid to McAllister and Barkwell v MacDonald, 2023 ABCA 87 as they are the cases that feature most prominently in the University’s argument.
Overall, Justice Graesser’s summary of the law is that it is incorrect to view these newer cases as advocating for making the use of Schedule C the exception and 40-50% of the actual costs the rule. He concludes that there is no large overhaul of the law when these cases are looked at in the context of the larger caselaw. In reading them all together, he makes some observations:
1. The appropriateness of a solicitor and own client bill has generally been the bailiwick of the Review Officers, who have considerable expertise in this area, as opposed to judges;
2. Cost awards outside the tariffs in Schedule C (solicitor and own client costs, solicitor and client costs, and partial indemnity costs) are very fact-driven;
3. The basic principles of party party costs in the Rules of Court have not changed since 1998. Only the amounts and tariff items have; and
4. Some Court of Appeal decisions, as cited above, treat Schedule C as the starting point for a party party cost award.
In short, McAllister and Barkwell, based on their facts, were not cases that merited the use of Schedule C and instead were the exceptions to the rule that Schedule C will be the usual means of setting costs awards. They do not stand for a proposition that the Bench will start awarding costs derived from the actual legal expenses of the parties involved. Notably, while Barkwell said that Schedule C is not a “mandated method,” Justice Graesser is clear that it remains the “presumptive” approach to costs. All that can be taken away from Barkwell and McAllister is that costs are very discretionary and sometimes the use of Schedule C is not appropriate. However, Schedule C is still the starting point for party-party costs.
After his defence of the use of Schedule C and conclusion that the University’s costs will be set on Column 1 of Schedule C, Justice Graesser also notes that Schedule C is once again out of date. While the most recent adjustment was made in 2020, it was based on 2014 recommendations. Given this, he relies on Statistics Canada information that says there has been a 25% increase in the cost of living since 2014. So, to keep Schedule C relevant, he says he will apply a 1.25 multiplier.
Justice Graesser’s decision in Grimes defends the use of Schedule C and awarding costs that are often just a fraction of the actual costs incurred by the successful party. How his defence of the use of Schedule C will impact the future remains to be seen as he was only able to interpret and distinguish Grimes from cases like McAllister and Barkwell (he could not overrule them since they are Alberta Court of Appeal decisions).
Regarding the 1.25 multiplier or 25% increase to Schedule C costs, there has yet to be any treatment of this approach. Given the highly discretionary nature of costs that Justice Graesser himself acknowledges, even though this Alberta Court of King’s Bench decision will be binding on lower courts, and is likely to be persuasive, Justice Graesser talks at length about the discretionary nature of costs. So, it remains to be seen whether Courts will follow his lead and exercise their discretion in the same manner in future cases.
Rule 10.42 and the Increased Court of Justice Limits (Alberta’s lower court for cases up to $100K)
Rule 10.42 holds that where claims in the Court of King’s Bench fall under Court of Justice jurisdiction ($100K or less), costs can only go up to 75% of the amount specified in Column 1 of Schedule C. While “jurisdiction” here applies to both the monetary claim amount and type of suit, it is possibly that many claims in the Court of King’s Bench under $100,000 will be discounted and then, arguably, subject to the Grimes multiplier of 1.25. (Note: whether you apply the Grimes multiplier before or after reducing by 25% makes no difference to the final calculation).
Even if the Grimes multiplier does not come into broad use, the decision likely forecasts that further inflation of costs awards in Alberta is coming in the not-too-distant future.