C. The Recovery of Online Legal Research Costs

• Author: Ted Tjaden
• Profession: National Director of Knowledge Management McMillan LLP
• Pages: 11-21

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Although legal research still involves the use of printed materials, the trend is clearly towards using online resources. One of the ways in which the importance of legal research has been recognized is when a court or taxing officer has allowed recovery of the costs of online research.⁶The issue arises in two circumstances: (i) where a client is challenging the bill of its own lawyer and (ii) where the losing party is obliged to pay the winning party’s costs but objects to having to pay the online charges or argues that the amounts are excessive.

In the first scenario, courts (or taxing officers) will tend to favour the client and not require the client to reimburse the client’s law firm for the online research disbursements unless (i) the law firm has clearly indicated in its retainer agreement with the client that the law firm may incur such charges on behalf of the client and pass those costs on to the

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client, and (ii) the costs were necessary and reasonable. For example, in Oliver & Co. v. Choi,⁷the court held that the client was responsible to reimburse her lawyers for Quicklaw search charges, but the amount was reduced since it was excessive and was not mentioned in the retainer agreement.⁸In Shagoras Enterprises Ltd v. Lindsay Kenney LLP,⁹the court did not require the client to pay the online research charges since the firm was not able to justify them.¹⁰Likewise, in Ramsay Lampman Rhodes v. Calvin,¹¹the court disallowed recovery of online research charges by the law firm since the firm did not provide evidence that the charges to the client were necessary or reasonable.¹²In several cases, the court either denied recovery by the law firm¹³or reduced the amount to be reimbursed by the client¹⁴on the basis that the law firm had a flat rate arrangement with the online providers. In Berge Horn v. Ziebler,¹⁵for example, the retainer agreement obliged the client to "to pay, as and when they are incurred, any expense, disbursements and applicable taxes." The law firm in question had a monthly flat rate agreement with each of Quicklaw and Westlaw but billed the client the notional search charges generated by both databases. Since the law firm did not "incur" these notional search charges (but instead paid its usually monthly flat rate), the charges were held to not be payable under the retainer agreement.

However, in most situations where law firms are conducting research on one or more of the commercial online databases, the research is specific to that client and hence not overhead in the same way that a law firm’s general print library materials would be. In addition, the client will ordinarily be benefitting from the specific online research that would be much more expensive to the client if done in print (or in many cases, trying to conduct the research using print resources may not even be feasible). As such, clients should be required to pay such charges where the cost is reasonable. However, the onus is on the law

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firm to explain in clear terms to the client in the retainer agreement the purpose of such research and how it will be priced. For example, if the firm has a flat rate contract with online providers and the firm will be passing on the cost of research based on the provider’s notional search costs, this should be disclosed to the client.

In the second scenario - where the losing party objects to having to pay the online research charges of the winning party (or argues that the amount is excessive) - the trend (except in Alberta) is towards allowing the winning party to recover the costs of legal research, including the cost of LEXISNEXIS Quicklaw or Westlaw Canada online search charges. There are a number of cases from each of British Columbia,¹⁶Manitoba,¹⁷

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Ontario,¹⁸Nova Scotia,¹⁹and the Federal Court²⁰where the winning

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party was successful in passing on all or part of its costs of conducting online research.²¹In Sellors v. Total Credit Recovery Ltd.,²²for example, the court allowed Quicklaw charges on the basis that they were cost and time effective:

The Quick Law [sic] research expense is a legitimate solicitor and client disbursement. I could be tempted in calling the charges items of overhead consumed in the time-keeper’s hourly rate and simply the cost of doing business. It is an interesting argument.

I believe that these particular disbursement expenses are created for a specific client in a specific proceeding touching on issues and law specifically relating to that client’s case. Quick Law [sic] is generally time and cost effective and efficient. The incurrence of the expense is neither unreasonable nor unnecessary.

Involvement with this cost is specifically for the benefit of the client. All reasonable and necessary disbursement expenses within the four corners of this litigation should be assessable. Quick Law

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[sic] research disbursement expense is not overhead expense within the meaning and intent of a solicitor and client award of costs.²³Likewise, in Boots v. Mohawk Council of Akwasasne,²⁴the court allowed Quicklaw disbursements on the basis that the research was necessary and the costs were reasonable:

As to the matter of disbursements, and as I explained at the assessment, an issue has arisen from time to time about computer research costs, in this case Quicklaw searches, and whether they are distinguishable from the overhead costs of a law firm, the premise being that overhead costs are already reflected in counsel fees. I am satisfied from counsel’s explanation, however, that the research conducted in respect of this particular counterclaim was necessary and the costs claimed by the Defendant were reasonably incurred. The other disbursements are supported by the evidence contained in the affidavit of K. Melanson sworn on July 5, 1999. They appear to be reasonable and necessary in the circumstances of these proceedings and are allowed with the following exceptions.²⁵In Atkinson v. MCGREGOR,²⁶ the court thought that online research, where necessary, should be promoted within the industry by allowing the recovery of online search fees:

I agree with the decision in Parsons: charges for Quicklaw are a cost of doing business for lawyers. Since a law firm might charge a disbursement for legal research done by an outside agency; it does seem odd that a law firm that has the capacity to do in-house research cannot claim the computer charges. Indeed, as I said in Kelly v Lundgard, a memorandum on costs issued on [sic] 1997 which did not find its way into Quicklaw, it is a cost which should be encouraged because it improves the quality of research at a very minimal cost to the client. I issued that decision as a Memorandum, and not Reasons, because I was of the view that the issue of charges for computer research was not a new topic in Alberta, having already been discussed in Wenden. In Kelly, I said:

. . . there is a strong public policy argument for supporting computer research and by making that support practical by awarding costs for access to computerized legal research. Done responsibly, computer access to data bases will give lawyers,

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and therefore litigants, much quicker access to applicable case law than can be achieved by the traditional, labour intensive, methods of legal research. The dramatic savings in time spent result in major savings to the clients. In addition, computerized legal research gives access to current case law, months before any of those cases would be published by traditional means. It may be too soon to declare that the normative standard for legal research is computer research, but the day on which courts will make that pronouncement cannot be far off.

That is not to say, however, that costs for computer research, like all other costs, will never be excessive. We are entitled to assume that lawyers have not only some general background in law, but that they have some general background in obtaining information from electronic data bases and are using appropriate means to acquire that information.

Moreover, as pointed out in Parsons, Quicklaw contains many decisions which are not otherwise reported . . .²⁷To the contrary, however, are several cases in which the courts have not allowed legal research costs or have reduced the costs to be awarded for legal research where the research was held to be unnecessary or not conducted in a reasonable manner²⁸or held to be overhead and hence

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not recoverable as a disbursement.²⁹In particular, Alberta courts tend to be the most restrictive on the basis that online charges are already covered in that part of the costs tariffs dealing with trial preparation. Although there were some older Alberta decisions...