In Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766 , a decision released on September 29, 2017, the Court of Appeal articulates the standard of conduct that will merit an award of full indemnity costs against a party. The circumstances in which this case arose are familiar to commercial litigators and the courts, and involve parties dissipating assets in anticipation or in the course of court proceedings.
Identifying the costs expectations of unsuccessful parties is a sensible objective where litigation of honest differences of opinion or difficult areas of law have occurred. However, in my view, the court should not concern itself with the expectations of demonstrated deceivers and liars, such as the Responding Parties in this case. […]
While we would not interfere with the costs award made by the motion judge, we would express a cautionary note on this issue. In this case, the motion judge awarded costs on a full indemnity basis. There is a significant and important distinction between full indemnity costs and substantial indemnity costs. An award of costs on an elevated scale is justified in only very narrow circumstances – where an offer to settle is engaged or where the losing party has engaged in behaviour worthy of sanction: Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66 (C.A.) at para. 28. Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.
In this case, full indemnity costs were warranted given the factual findings that the motion judge made regarding the conduct of the appellants, especially the movement of funds out of the country in an effort to place them out of reach of the respondents and the instances of fabricated evidence. We would reiterate, however, that it is only in rare and exceptional cases where such a costs award is justified.