In a major development in the law of costs, Mr. Justice Denis J. Power has distinguished the Supreme Court of Canada’s decision in Ritchie v. Walker and has held that, because of two changes to Rule 57.01 made in 2005, the reasoning in that case is no longer applicable and courts can again award costs premiums, payable by opposing parties, that reflect the risk assumed by plaintiffs’ counsel in taking on a case. A PDF of the as-yet unreported decision appears above. This post is a brief one so that the decision can be made available as quickly as possible.
The two changes to Rule 57.01 cited by Justice Power relied were:
- the addition of “the principle of indemnity” and “the amount of costs that an unsuccessful party could reasonably expect to pay” as factors under Rule 57.01, to be considered in the exercise of the judge’s discretion; and
- the amendment to Rule 57.01(4), allowing a court “to award costs in an amount that represents full indemnity”.
Readers of our blawg will recall that Justice Brockenshire, who was the trial judge in Walker v. Ritchie, held in Authorson Estate v. A-G, that the Supreme Court’s decision in Ritchie v. Walker is applicable, despite the changes to Rule 57. On that basis, Brockenshire J. deleted a $1 million premium that he had granted prior to Ritchie v. Walker being handed down.
It seems that we have not heard the last of this issue!
There were other interesting aspects to Justice Power’s decision in Ward. That was a case that went very badly indeed for the defendant Manulife at trial. Manulife had terminated a contract with one of its brokers (Ward), who sued for his unpaid commissions. Justice Power found that Manulife’s conduct had been “self-serving, malicious, arbitrary and high-handed”. Ward received very substantial damages, including an award of punitive damages. The plaintiffs sought costs of over $1 million. Manulife argued that costs should be fixed in the amount of $536,269.39.
In the result, Power J. awarded costs totalling $792,283.81. In the course of his decision, he found:
- that Manulife should reasonably have expected a higher award of costs, including premium, if the plaintiffs succeeded;
- an award of costs on a substantial indemnity scale does not amount to “double indemnity” where punitive damages have also been granted;
- although the plaintiffs’ offer to settle included a “non-publication” term that Power J. felt could probably not have been ordered by the court, the offer could still be treated as an offer to settle for purposes of Rule 57.01;
- following his usual practice, Justice Power ruled that substantial indemnity costs are 1.5 times the partial indemnity rate, but cannot exceed counsel’s actual hourly rate. In this case, he found that the rates claimed by counsel for the plaintiff were excessive and concluded that those rates should be “aged”, to reflect the fact that they had increased over the life of the litigation.