The addition of "plus costs and disbursements" is part of every settlement once a claim is in litigation, either expressly or implied within an "all inclusive" settlement. But what does this actually mean? This brief memorandum will provide some basic guidance regarding costs and disbursements.
Costs and disbursements are considered to be a separate item from damages and interest because they are meant to compensate a successful litigant for at least part of their expenses in bringing their lawsuit. They are not damages. Both costs and disbursements are subject to the review of a court official called the Assessment Officer (formerly called the Taxation Officer). When a settlement is reached for an amount inclusive of interest, plus costs and disbursements, implied in that statement is the possibility of a further dispute over the appropriate claim for costs and disbursements. Formally, a plaintiff's costs and disbursements are presented through their counsel in a Bill of Costs, sworn by plaintiff's counsel as representing the appropriate costs and disbursements incurred in litigation on behalf of the plaintiff. In practice, the Bill of Costs is not sworn unless the dispute over costs and disbursements will require a hearing before the Assessment Officer.
Costs (sometimes called "fees") are meant to compensate a litigant for a portion of their legal fees in commencing an action. In the usual case, this is done through use of a table called Schedule "C" of the Rules of Court. Schedule "C" has five (5) columns meant to divide up the size of the loss, e.g. Column 2 is for settlements and judgments that are over $50,000.00 up to and including $150,000.00 (including interest). Once the appropriate column has been selected, a plaintiff is entitled to amounts set out in the rows that include all the "steps" that have been undertaken in litigation. For example, Item 1(1) is "commencement documents, affidavits, pleadings and related documents, and amendments". A Column 2 action in which the plaintiff has filed a Statement of Claim is entitled to $1,500.00 under Item 1(1). Schedule C and the table for columns and items is attached to this memorandum for further review.
For claims professionals that may have some familiarity with Schedule "C" prior to November 1, 2010, the amendments to the Rules of Court made three changes which can be observed in most files that are referred to legal counsel. First, the old practice of the Assessment Officer (then called the Taxation Officer) was that the first costs item, pleadings, would only get the full amount stated if the matter was nearly ready for trial. Consequently, it was common practice to reduce the first item by up to 50% if the action had been just commenced for the purposes of preserving a limitation. This no longer applies and the full amount is normally applicable. One notable exception is where the settlement is less than $25,000.00 and therefore could have been brought in Provincial Court, not more than 75% of Column 1 will be claimable.
The second change is a new item, being an amount for review of the opposite side's Affidavit of Records and/or documents. This is another possible area where an argument can be made for reduction, as typically in MVA cases, the insured defendant has minimal document production. Finally, there is another new entry for preparation for Questioning (claimable once in litigation).
In our review as defence counsel of a plaintiff's Bill of Costs, we mostly look to verify that no more than the appropriate steps have been claimed, such as number of days or half-days of Questioning, and that the appropriate column has been used.
Disbursements are actual expenses incurred by plaintiff's counsel for the purposes of advancing the plaintiff's claim. Expenses for medical reports, copies of charts, and searches for the defendant and service upon the defendant, are typical, and allowable, disbursements.
A common error we see in claims for disbursements are attempts to shoe-horn into the Bill of Costs additional expenses incurred by the plaintiff relating to treatment, which is impermissible. That type of expense is a form of damages, not disbursements. Other commonly claimed disbursements that will not be allowed include file administration fees, "litigation consultants" and overcharging for photocopying (the approved rate is only $0.15 per page).
These types of impermissible disbursements aside, one of the most important things to realize about a plaintiff's claim for disbursements is the standard of review the Assessment Officer will take if you dispute an item claimed in disbursements. The Assessment Officer will allow disbursements incurred on behalf of a plaintiff that would have been taken by "a prudent solicitor", meaning a careful lawyer wanting to advance his client's claim to the best of his or her ability. Consequently, we can be frustrated by, but will normally have to pay, expenses that seem inordinate to the size of the claim, such as an orthopedic surgeon's examination of a plaintiff with only a modest injury. There are exceptions where the expense is grossly out of proportion to the benefit to the litigation, but as a practical matter the benefit of the doubt tends to go to the plaintiff, who will be responsible for the expense regardless of whether it is claimable against the defendant or not.
Another thing to know about disbursements is that you may see expenses for reports or charts that you had not actually seen before. This is permissible and usually properly claimable by a plaintiff. If a plaintiff had a report prepared by an expert, disclosure of that report is a different issue (relating to privilege) than whether or not the expense itself was properly incurred. Often, for example, a plaintiff may obtain an economist report relating to their loss of income that will not be disclosed to defence counsel until close to a JDR or trial. If the matter is resolved by way of settlement prior to that step, we may learn of (and have to pay for) the economist report even though we had not seen that document previously. Strictly speaking, defendants are not entitled to ask for a Bill of Costs to be prepared in mid-litigation settlement discussions, so doing so is a courtesy by plaintiff's counsel in hopes of settlement. As noted above, an item such as a report on a Bill of Costs is not necessarily producible mid-litigation, so a still-privileged report may be properly claimed but not disclosed to you.
When you receive a Bill of Costs following settlement that includes a number of disbursements, you are entitled to ask for copies of the disbursement invoices. Also, where documents have been provided by plaintiff's counsel (and paid for by the defendant's insurer) care should be taken to ensure that the previously paid for disbursements are reflected as having been paid in the Bill of Costs.
A settlement made "plus assessable costs and disbursements" still allows for dispute over the appropriate fees and disbursements claimed by a plaintiff, and you need not immediately accept the Bill of Costs as presented by plaintiff's counsel. As noted in this memorandum, the most common errors we find are improper claims for damages as disbursements, the incorrect column for fees/costs, and occasionally very excessive disbursements far out of proportion to the lawsuit. In most of these circumstances the issue is easily resolved by contacting plaintiff's counsel as the rules regarding costs and disbursements are reasonably well known.
The Review/Assessment Officer also has several documents detailing claimable costs and disbursements that are available here.
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.