Written by Dominique T. Hussey, L.E. Trent Horne and Jeilah Y. Chan
In Canada, the losing party pays the winner’s litigation costs. For years, costs awards were assessed in accordance with a tariff and were generally inadequate. The Federal Court's recent trend in awarding lump sum costs instead may now be the default, especially when dealing with sophisticated commercial parties. Now, when considering the risks associated with taking a case to trial, litigants should presume that the loser will indemnify the winner for about 25–33 percent of legal fees incurred, plus all reasonable and necessary disbursements.
Corocord Raumnetz Gmbh and Kompan A/S v. Dynamo Industries Inc., 2017 FC 348 - 2017-04-07
Corocord manufactures and sells playground structures. One of its competitors, Dynamo Industries, offered very similar, competing playground structures. Corocord sued Dynamo, asserting that its copyright and trademark rights were infringed. After a full trial, all of Corocord's claims were dismissed. As the successful party, the defendant, Dynamo, was presumed to be entitled to partial payment of its legal costs (legal fees plus disbursements).
Under the Federal Courts Rules, legal fees are presumptively assessed in accordance with a tariff. The tariff provides a range of monetary recovery, but only for certain steps in the litigation such as discovery of documents or attendance at trial. Generally, an assessment of costs under the tariff only provides modest recovery of fees actually incurred.
Judges are not bound to assess costs using the tariff; the award is entirely discretionary. Recently, especially in cases involving sophisticated commercial litigants, judges have assessed costs on a lump sum basis, often as percentage of actual fees incurred. The lump sum approach has resulted in costs awards that are significantly higher than the corresponding award using the tariff approach.
Many litigants and the Court prefer a determination of costs on a lump sum basis as it saves time and money and is generally a more efficient process to determine the appropriate quantum. While calculating a lump sum award is not an exact science, it is a practical and pragmatic way to resolve the costs issue where the expense of precise determination could exceed the amounts ultimately awarded.
Dynamo was awarded 25 percent of its legal fees. Other cases have awarded about one third of actual fees paid. Here, the Court awarded a lesser amount taking into consideration, among other things, the defendant's failure to concede certain issues and the number of lawyers involved. Dynamo was also compensated for the majority of its claimed disbursements.
While a lump sum costs award is not automatic, the Corocord case is the most recent example of a clear trend that the Court is moving away from calculating cost awards under the tariff. It appears that a lump sum assessment of costs is now effectively the default methodology when dealing with sophisticated commercial parties.
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