The news today contains two stories about parties seeking or being ordered to pay legal fees over $ 100 000.00 to a party on the other side of a law suit.
Helena Guergis has been ordered to pay $ 118 560.00 to the defendants she unsuccessfully sued for defamation after being removed from the Conservative Party and Caucus. Rob Ford is seeking over $ 100 000.00 from the man who unsuccessfully brought an Application for his removal from office.
The newspaper articles I read today are written from a point of view of shock that these awards are made and sought: they should not be. In Ontario, the loser of any stage of a law suit generally pays the legal fees of the winner.
There is good reason for awarding costs against the loser: it reduces frivolous litigation and ensures that we don’t end up looking like the USA legal system. I am aware of the view point that says this stifles legitimate litigation by scaring people away with the threat of legal fees.
The amount of legal fees awarded is divided into two categories: substantial indemnity and partial indemnity costs. Substantial indemnity costs are 100% of the legal fees and disbursements the winner paid their lawyer. Partial indemnity are approximately 60% of the legal fees and 100% of the disbursement the winner paid their lawyer.
Substantial indemnity costs are generally only awarded in a few situations:
1. if there is a contract that entitles the winner to those costs;
2. if the loser has alleged fraud and is unsuccessful;
3. if the winner had offered to settle for amount less than they were awarded.
The $ 100 000.00+ amount of costs that are in the news are due in large part due to the lawyers who represented the defendants. There are many very expensive “Bay Street” lawyers who will quickly run up fees. Some lawyers bill $ 1800/hour. Ours does not.
A company with a good reason to sue should not be afraid to do so. With good legal advice, the risks can be properly managed and there will be no $ 118 000.00 surprise legal bill at the end of the day.