Written By David McKinnon, Ciara Mackey, Justin Duguay and Chelsea Tolppanen

Awarding double costs on appeals following a formal offer to settle encourages parties to resolve claims quickly among themselves and at the least expense, the Alberta Court of Appeal recently confirmed in Mostafa Altalibi Professional Corporation v Lorne S. Kamelchuk Professional Corporation, 2022 ABCA 364 [Altalibi]. The decision settles the law on when a formal offer made during an appeal will trigger an award of double costs under the Alberta Rules of Court (Rules) and confirms that those cost consequences follow even when the appeal does not finally resolve the claims between the parties.

Background

As detailed in our November 2020 insight, Court Orders Videoconference Questioning for Discovery and Provides Guidance for the Use of Technology in Litigation Proceedings, in the case of Mostafa Altalibi Professional Corporation v Lorne S. Kamelchuk Professional Corporation, 2022 ABCA 239, the Court of Appeal dismissed the appeal of a chambers decision that permitted questioning to be conducted by videoconference, noting that videoconferencing is an effective way of advancing litigation, particularly during a pandemic.

Before the appeal was heard—after receiving the appellants' factum but before filing their own—the respondents made a formal offer under the Rules. The offer provided that if the appellants discontinued the appeal, each party would bear its own costs. The appellants did not accept the formal offer.

Rule 4.29 of the Rules states that if a party makes a formal offer that is not accepted and they subsequently obtain a judgment that is equal to or more favourable than the formal offer, the party is entitled to double the costs. Rule 14.59 adopts the same rule for appeals, allowing a party to make a formal offer to "settle the appeal or any part of the appeal."

The respondents won the appeal and so came the costs. Relying on the Rules, the respondents asked the Court of Appeal to double the costs payable by the appellants after February 10, 2022, the day the formal offer was made. The appellants opposed the request for double costs on several grounds including that the offer lacked a sufficient compromise and was made during an interlocutory appeal. The Court granted the request and ordered double costs.

The Court of Appeal Confirms Compromise and that Double Costs Apply in Interlocutory Appeals

At the outset, the Court of Appeal confirmed that the Rules for formal offers apply to interlocutory appeals. Because the appeal was on a procedural issue (questioning by videoconferencing), the offer did not propose to settle any substantive part of the claim. But whether an appeal is interlocutory or not, the Court of Appeal held that "a formal offer still encourages settlement and prevents unnecessary litigation".

The Court of Appeal also disagreed that the formal offer was a "think again" tactic without real compromise, because it expired before the hearing of the appeal. While the Court acknowledged that “[f]ormalistic offers merely designed to double costs are discouraged,” in this case, the offer was made prior to the respondents filing their factum and expired after the factum was filed. In other words, the offer was made before the respondents incurred costs and did not expire until after those costs were incurred. The respondents had offered to forego costs accrued while the offer was open, which they were now to be awarded after being successful on the appeal. The Court of Appeal held that the offer contained a sufficient and identifiable compromise, satisfying the elements under the Rules.

Finally, the Court of Appeal rejected the possibility of over-indemnification in the award of double party-party costs under Schedule C of the Rules.

Looking Ahead

Parties who "gamble and lose" on appeal must accept the consequences for doing so. Altalibi provides welcomed guidance for those considering formal offers on appeal, especially in interlocutory appeals, and encourages parties to consider opportunities for early resolution.

David McKinnon and Justin Duguay of Bennett Jones LLP were counsel for the successful respondents.

If you have any questions about appeals or offers to settle, please contact a member of the Bennett Jones Commercial Litigation group.

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