Costs after trial requires an application of rule 57.07(1) of the Rules of Civil Procedure. The starting point is to think big picture and what is reasonable for the particular case and outcome. Then delve into the rule 57.07(1) factors.
Time spent is but one factor as time and value are different concepts. The Court of Appeal has had some interesting things to say on the billable hour, for example in Bank of Nova Scotia v. Diemer at paragraph 36 onwards.
The Risks of Trial
A law firm going to trial must consider the following risks:
- Resources – legal fees, disbursements and HST (in other words, time and money);
- Costs – the possibility of having to pay the other side’s costs; and
- Merits – The likelihood of success or failure.
Note that resources and costs have nothing to do with the merits.
In terms of resources, a firm must be able to go to trial. Trial is disruptive, especially if you have not been to trial before to learn how to be efficient in preparing and conducting trials. The simplest reason to retain trial counsel is based on available resources.
One way to reduce the risk of paying the other side’s costs is to obtain costs insurance. Also called After the Event (ATE) insurance, this insurance can provide protection against having to pay costs. Doing so enhances bargaining power by changing the risk of trial and as a result improves results. ATE is generally available in Ontario in personal injury cases and some commercial cases.
The merits of a case affect the potential gain and resources to put into a matter as well as the costs exposure. Obviously, a case with good merits is one reason to go to trial if settlement discussions and mediation aren’t productive.
Trial Costs and Contingency Fees
Contingency fee retainer agreements do not impact negatively on costs. Pursuant to section 21.1. of the Solicitors Act, a Court may not reduce costs just because there is a contingency fee retainer agreement.
Where Costs Exceed Damages
Due to the nature of litigation being slow and expensive, especially in the context of Jury trials, there are times when costs can exceed damages. Minor MVA trials, for example, can have damages under $100,000 with costs over $100,000. Depending on the retainer arrangement, these costs may be recoverable by a law firm who has invested significant time and money into the case.
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