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Recognizing the High Cost of Litigation: Federal Court Awards 50% of Actual Legal Costs

The Federal Court has traditionally calculated costs awards using the amounts specified in Tariff B of the Federal Courts Rules. There has, however, been a recent trend recognizing the inadequacy of those amounts compared to the actual costs of litigation. In some recent cases, Courts have begun ordering lump sum costs awards based on a percentage of actual legal costs incurred.

In Hospira Healthcare Corp. v. Kennedy Institute of Rheumatology, Justice Phelan ordered one of the highest percentages seen so far. The Defendants’ (Kennedy/Janssen) actual legal fees were approximately $5 million. The highest Tariff level would have compensated for only $431,000. Justice Phelan ordered the Plaintiffs (Hospira/Celltrion) to pay 50% of the Defendants’ actual legal fees plus all disbursements incurred, for a total of approximately $3.5 million.

This high award was a result of the Plaintiffs “contesting every aspect of the case even when there was no reasonable prospect of success” but losing “every major point in this litigation”, and having “lengthened the proceedings and added additional time, work and expense,” including forcing steps that were “unnecessary, unreasonable and disproportionate.” For example, the Plaintiffs brought numerous failed motions, and pursued evidence in the U.K. but, after occupying considerable Court time, announced at the last minute that they no longer wanted the evidence.

The decision is further confirmation of the Federal Court’s movement towards costs awards that better reflect the real costs of litigation. It also suggests that Courts may use costs to deter litigants from bringing superfluous motions, taking unreasonable positions, or advancing clearly weak arguments at trial.

A copy of the decision can be found here.