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Fairness in the Justice System: What Are Costs?
The Canadian legal system is an inherently confrontational system. One party has a grievance against the other and they need the justice system to tell them how to resolve the issue. These grievances may fall within a wide range of categories from a home buyer suing the builder for shoddy work, a company suing another for a breach of contract, one spouse filing for divorce against the other, or countless others.
For all these different grievances there are generally only three typical outcomes: the person who started the matter is successful, the person who responded to the issue is successful, or the parties both have success rendering the overall result mixed.
Costs are the legal system’s tool to ensure the successful party does not pay an undue amount to prove they are owed something which was theirs at law all along. If the party who raised the issue with the court is successful, they may be awarded costs as indemnification for having to resort to the courts to force the opposing side to do what they should have done from the beginning. Likewise, if the party who had the issue raised against them is successful, they may be awarded costs as indemnification for being forced to defend an invalid claim. Mixed success issues typically result in no costs awarded.
In Alberta, the awarding of costs is governed by the Alberta Rules of Court section 10, division 2.
Rule 10.29 states:
A successful party to an application, a proceeding or an action is entitled to a costs award against the unsuccessful party, and the unsuccessful party must pay the costs forthwith, notwithstanding the final determination of the application
Typically, costs are a partial indemnity of the total costs incurred. Judges have various ways of determining final costs, from using a set schedule set out in the Rules (Schedule C) to a discretionary practice of awarding a percentage of the actual incurred legal costs of the successful party, typically between 40-50%: McAllister v Calgary (City), 2021 ABCA 25. These types of costs are awarded under Rule 10.33(1) and are typically referred to as party and party costs or reasonable and proper costs.
Costs of this kind are therefore a tool by which the court can try to strike the delicate balance between ensuring that potential litigants can feel secure that they will have some protection from the court against the costs of pursuing what is rightfully theirs and deterring potentially successful litigants from being fearful of defending their rights and losing thereby incurring an extra expense in the form of costs: Weatherford Canada Partnership v. Artemis Kautschuk und Kunstoff-Technik GmbH, 2019 ABCA 92.
Another form of costs are awarded under Rule 10.33(2) and these are often costs as an instrument of policy whereby the behaviour of one party is so bad that the courts find it necessary to award costs against them to dissuade both that party, and future parties, from acting similarly. This form of costs may accomplish various purposes apart from indemnification, including: to discourage unnecessary steps in litigation, to sanction bad or frivolous behaviour, and to encourage settlement: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71.
Costs are at the discretion of the courts, both in terms of being awarded and the ultimate amount. They are a measure by which the courts can try to maintain fairness in the justice system.