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Civil Litigation Dicta - Costs - Partial/Substantial/Full Indemnity. Chernukhina Estate v. Gurevich
In Chernukhina Estate v. Gurevich (Ont Div Ct, 2026) the Ontario Divisional Court considers substantial indemnity costs:[7] Substantial indemnity costs should only be awarded when an offer to settle is engaged or where the losing party has engaged in reprehensible, scandalous, or outrageous conduct: More v. 1362279 Ontario Ltd. (Seiko Homes), 2023 ONCA 527, para. 31. A party’s behaviour would have to be especially egregious to justify full indemnity costs: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, 140 O.R. (3d) 77, at para. 8. . Patrick Street Holdings Ltd. v. 11368 NL Inc.
In Patrick Street Holdings Ltd. v. 11368 NL Inc. (SCC, 2026) the Supreme Court of Canada considered 'cause of action estoppel'.
Here the court considers the award of solicitor-client costs, and personal costs against counsel:[136] Costs on a solicitor-client basis are generally awarded only in the most exceptional circumstances, where there is “reprehensible, scandalous or outrageous conduct on the part of one of the parties” (Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3, at p. 134). Furthermore, courts must be exceedingly cautious in awarding costs personally against counsel. Lawyers have professional and ethical obligations to keep strictly confidential the instructions they receive from their client. They have further professional and ethical obligations to zealously and courageously advance arguments on behalf of their client where they believe such an argument will help their client’s case (pp. 135-36; see also Groia v. Law Society of Upper Canada, 2018 SCC 27, [2018] 1 S.C.R. 772, at para. 73).
[137] Ordering costs personally against counsel raises concern that fear of an adverse costs order or the ability to defend against it could come into tension with these obligations (Young, at p. 136). For this reason, costs should be ordered personally against counsel only exceptionally, where “repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay” (pp. 135-36; see also Schwisberg v. Perry Krieger & Associates (1997), 1997 CanLII 522 (ON CA), 33 O.R. (3d) 256 (C.A.), at p. 260).
[138] In arguing that Patrick Street’s counsel should personally bear 11368’s costs, 11368 relies on a 1992 decision of the Ontario Superior Court of Justice, Donmor Industries Ltd. v. Kremlin Canada Inc. (No. 2) (1992), 1992 CanLII 7543 (ON SC), 6 O.R. (3d) 506, where solicitor-client costs were ordered to be paid on a joint and several basis by the plaintiffs and their solicitor. The facts in Donmor Industries Ltd. were exceptional. Counsel for the plaintiffs drafted a 25-page statement of claim containing allegations of conduct that, if proven, would constitute crimes. The Court also found as fact that counsel knew advancing certain claims would run contrary to the doctrine of res judicata. Even after making these findings, the court did not go so far as to order solicitor-client costs to be borne solely by the plaintiffs’ counsel.
[139] In this case, there is no basis for an order of solicitor-client costs. Nothing in Patrick Street’s conduct as a litigant can be said to rise to the level of “reprehensible, scandalous or outrageous conduct”. In my view, it is not enough that Patrick Street has attempted to relitigate its claim for entitlement to payment under the $4 million mortgage despite the same cause of action having already been argued in 2016. If it were enough, solicitor-client costs would arise in every case where res judicata was found to apply. This cannot be the case; something more is required.
[140] Neither is there any basis to order costs payable by Patrick Street’s counsel personally. Such an order requires a finding that counsel acted in bad faith. The trial judge made no such finding, and there is nothing on the record before this Court that supports such a finding. It also bears repeating that 11368 has only now argued for costs to be payable on a solicitor-client basis and, similarly, has only now requested costs payable by Patrick Street’s counsel personally. In the courts below, 11368 was content to receive costs on a party-and-party basis payable by Patrick Street, as is standard. The conduct with which 11368 takes issue — the relitigation of Patrick Street’s claim for entitlement to the $4 million mortgage — first occurred in 2019, when Patrick Street advanced the argument before the application judge. It is telling that 11368 took no issue with counsel’s conduct in the courts below. For these reasons, I cannot accept that a personal costs order is appropriate in this case.
[141] I would thus dismiss the appeal, with costs payable by Patrick Street to 11368 on a party-and-party basis. . Vassell Estate v. Vassell
In Vassell Estate v. Vassell (Ont CA, 2026) the Ontario Court of Appeal granted a s.7(5) panel set aside motion, here regarding a "full indemnity costs" order:[10] An award of costs on an enhanced scale may be justified as a sanction for a party’s behaviour in the conduct of proceedings. Costs on a full indemnity scale are reserved for exceptional cases where a party’s misconduct is “especially egregious”: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, 140 O.R. (3d) 77, at para. 8. As this court noted in Bayford v. Boese, 2021 ONCA 533, 69 E.T.R. (4th) 216, at paras. 5-6, the conduct of a party in the court below may be considered by the judge of first instance in awarding enhanced costs; however, it is only a party’s conduct on the appeal that would justify such a costs order to be made by this court. . Quebec (Attorney General) v. Pekuakamiulnuatsh Takuhikan
In Quebec (Attorney General) v. Pekuakamiulnuatsh Takuhikan (SCC, 2024) the Supreme Court of Canada dismissed a Quebec Crown appeal, that from an allowing by the Federal Court of Appeal, and that from a dismissal of the action at the Federal Court - the action being grounded in the allegation that "Canada and Quebec were in breach of good faith, the obligations flowing from the honour of the Crown or any fiduciary obligation" over a contract whereby the band provided it's own police service and the governments funded it.
The court considered a solicitor-client costs request, grounded in the other side's behaviour. This was declined it as it was not behaviour occuring during the course of the various litigation proceedings, but misbehaviour occuring in the course of the events themselves:[239] The respondent also asked this Court to award costs against Quebec on a solicitor‑client basis. It argues that the appeal represents an exceptional circumstance because it had to [translation] “prolong legal proceedings to have the Appellant’s failure . . . sanctioned despite the fact that the Intervener [the Attorney General of Canada] did not seek to appeal the judgment sanctioning their concerted actions” (R.F., at para. 159). It says that following the usual rule would be contrary to the purposes of reconciliation.
[240] I cannot accept those arguments. In my opinion, this case does not involve exceptional circumstances within the meaning of the case law on costs. In exercising its discretion, the Court awards costs on a solicitor‑client basis where a party has displayed “reprehensible, scandalous or outrageous” conduct or where an appeal raises issues of general importance that go beyond the particular case of the successful party in the appeal (see, e.g., Montréal (City) v. Octane Stratégie inc., 2019 SCC 57, [2019] 4 S.C.R. 138, at para. 95). Here, there are no such circumstances that would justify exercising our discretion. There is nothing to suggest that Quebec acted in a reprehensible, scandalous or outrageous manner in connection with these judicial proceedings. Likewise, Pekuakamiulnuatsh Takuhikan has not shown that it has “no personal, proprietary or pecuniary interest in the litigation that would justify the proceedings on economic grounds” or “that it would not have been possible to effectively pursue the litigation in question with private funding” (Carter v. Canada (Attorney General), 2015 SCC 5, [2015] 1 S.C.R. 331, at para. 140; see also Anderson v. Alberta, 2022 SCC 6, at para. 73). I would not depart from the usual rule on awarding costs. . Investigation Counsel PC v. Dorrett
In Investigation Counsel PC v. Dorrett (Div Court, 2024) the Divisional Court cites a leading case on 'substantial indemnity' cost awards:[39] In my view, the high test for substantial indemnity costs, as set out in S & A Strasser v. Richmond Hill (Town) (1990), 1990 CanLII 6856 (ON CA), 1 O.R. (3d) 243 (C.A.), has not been met. . Mascia v. Tri-Star Disaster Recovery Inc.
In Mascia v. Tri-Star Disaster Recovery Inc. (Div Court, 2024) the Divisional Court largely dismissed an appeal against a quantum meruit home renovation case, with a high substantial indemnity costs award.
Here the court considered a substantial indemnity costs award where the plaintiff had alleged fraud:[62] It is not our role to re-weigh the factors balanced by the trial judge in the exercise of his wide discretion. He relied on clear authority supporting a costs penalty against a party who alleges fraud and fails to prove it at trial.
[63] Moreover, the threat sent by counsel to Anthony Mascia just days before the trial commenced was reprehensible. The fraud claim so aggressively asserted could not even survive the first week of trial. Yet it was maintained for seven years and brandished as a weapon right up to the end. It deserves sanction in costs if not more. . Shannon v. Hrabovsky
In Shannon v. Hrabovsky (Ont CA, 2024) the Court of Appeal considers the proportions when assessing 'substantial indemnity' versus 'partial indemnity':[6] However, we are not satisfied that the amount the respondent seeks in costs is justified, even on an enhanced basis. The respondent appears to have calculated the figure she seeks by using a substantial indemnity rate that is the same as or higher than her counsels’ actual billing rates. As this court noted in Akagi v. Synergy Group (2000) Inc., 2015 ONCA 771, 128 O.R. (3d) 64, at para. 57:[C]osts awarded on a substantial indemnity scale are to be determined on the basis of applying a factor of 1.5 to the amount of the partial indemnity costs as fixed (or that would otherwise have been fixed) in accordance with the Rules and Tariff A. See also r. 1.03 of the Rules of Civil Procedure, O. Reg. 575/07, s. 6(1). Since partial indemnity costs are ordinarily calculated using an hourly billing rate that is around 60 percent of counsel’s actual rate, and since the amounts awarded must generally be adjusted further to take into account the factors in r. 57.01(1) of the Rules, costs awards that are made on a substantial indemnity basis typically fall short of full indemnity recovery.
[7] In our view, it is appropriate in this case to estimate substantial indemnity costs as 80% of full indemnity costs: see Yan v. Hutchinson, 2024 ONCA 158, at para. 4. Therefore, we fix the respondent’s costs at $80,000 all inclusive, to be paid by the appellants.
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