The culture shift in the litigation process towards "proportionality" was front and centre in a recent costs decision by Mr. Justice Peter Michalyshyn in Sutherland v. Encana Corporation, 2014 ABQB 601 ("Sutherland"). The proportionality principle, as stated in the important Supreme Court of Canada decision of Hryniak v. Mauldin, 2014 SCC 7 ("Hryniak"), "... means that the best form for resolving a dispute is not always that with the most painstaking procedure." Further, in the Alberta Civil Procedure Handbook 2015, Hryniak is cited for the following general proposition: Court process should not be disproportionate (in expense and time) to the nature of the dispute and the interests involved. That requires a shift in culture. (All as cited by the Court in Sutherland at para. 58).
In Sutherland, the defendants issued a Calderbank offer (an offer that can be used with prejudice after trial for costs consequences) 100 minutes before the start of the trial. It was rejected and the plaintiffs went on to beat that offer by a mere $4,273.18 at trial. The plaintiffs argued that a win was a win and that they should get all of the costs of the nearly four-week trial. The defendants argued that such a "small" win did not warrant awarding the plaintiffs their full costs of trial. The court agreed with the defendants in finding that a deviation from the usual rule that costs follow the event was warranted in this case given that the plaintiffs beat the defendants' position by just over 1% of what was offered. The trial fee cost of $44,400 exceeded the net gain of the plaintiffs' win by more than ten times.
In making its decision to reduce the plaintiffs' trial costs award, the court also considered the parties' respective efforts to settle short of trial. The plaintiffs were given credit for pressing for a JDR earlier in the process. The defendants were given as much credit if not more for their efforts to settle closer to trial. These efforts included multiple and increasing offers over the course of the litigation. Further, the defendants' effort to settle on the eve of trial and suggestion of a brief settlement adjournment before the start of trial was also favourably taken into account by the court. Mr. Justice Michalyshyn indicated that it is rarely if ever "too late" to pursue settlement. The defendants also relied on Hryniak in its costs submissions and the Court found those arguments to be persuasive. Specifically, the court took note of the SCC's comments that judges must actively manage the legal process in line with the principles of proportionality. The court reduced the plaintiffs' trial costs and disbursements by 25% based on the above principles. In doing so, the court acknowledged that such a decision may deter meritorious claims from proceeding to trial however, in this case, that "chill" is outweighed by the need to address the defendants' liability for a costs claim that was greatly out of line with the plaintiffs' award compared to what was offered for settlement on the eve of trial.
This decision by the Alberta Court of Queen's Bench is yet another in the shift towards active management of the litigation process by the courts and the encouragement of settlement amongst parties by attaching monetary consequences for failure to settle where it makes sense. Failure to seriously consider a settlement offer and ultimately accept it where the court process is disproportionate to the "nature of the dispute and the interests involved" may lead to costs consequences down the line.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
