Executive Summary: Key Legal and Evidentiary Issues

• Procedural fairness was challenged due to the Assessment Officer’s refusal to require disclosure of the names and work details of legal personnel listed by initials in the Bill of Costs.

• The extent and application of solicitor-client privilege over billing records and narrative descriptions were central to the dispute.

• The Appellants’ ability to meaningfully challenge the reasonableness of the claimed legal costs was limited by redactions and lack of detailed information.

• The court considered whether seeking solicitor-and-own-client (full indemnity) costs results in an implied waiver of solicitor-client privilege for cost assessment purposes.

• The appropriateness of awarding full indemnity costs and the requirement for tailored disclosure to ensure procedural fairness were examined.

• The matter was remitted to a different Assessment Officer with directions for more fulsome disclosure, and each party was ordered to bear their own costs for the appeal.

Facts of the case

The litigation between Xiaoli Lily Wang and Daiming Robert Li (the Appellants) and Alberta Health Services (the Respondent) began in 2014 after the Respondent attempted to conduct an inspection of the Appellants’ rental premises under the Public Health Act, RSA 2000, c P-37. The Appellants refused consent, prompting the Respondent to seek judicial authorization. This led to a series of applications and appeals. In March 2015, the Respondent obtained an order upholding the inspection, with the issue of costs adjourned to a special chambers hearing in June 2016.

On June 8, 2016, Justice Jeffrey awarded costs to the Respondent on a solicitor-and-own-client indemnity basis for most steps taken, fixing the amount at $120,673.00 (the "Initial Costs Order"). The order also included a discretionary term permitting the Respondent to waive a portion of the costs if the Appellants issued a retraction and apology—an offer the Appellants did not accept.

On May 30, 2019, the Respondent filed an Appointment for Assessment of Costs. The matter proceeded before the Assessment Officer on June 20, 2019, resulting in the certification of the Respondent's costs as set out in the Bill of Costs. On July 22, 2019, the Appellants filed an appeal of the Assessment Officer's decision pursuant to Rule 10.44 of the Alberta Rules of Court. The appeal process included a case management conference and a procedural order from Justice Wilson on May 29, 2024, which limited the issues on appeal to whether the Respondent should provide the actual names of the persons performing legal work shown by initials in the Bill of Costs, and whether to provide details of the work performed by those individuals.

Policy terms and clauses at issue

The Bill of Costs submitted by the Respondent claimed a total of $137,901.98, including legal fees and disbursements. The Bill of Costs listed 32 individuals by initials, with all time billed at a uniform rate of $315 per hour. The Appellants objected to the lack of disclosure of the identities and roles of these individuals, as well as the redaction of narrative descriptions of the work performed. The Respondent asserted solicitor-client privilege over the narrative descriptions, citing section 27 of the Freedom of Information and Protection of Privacy Act, RSA 2000, c F-25 (the "FOIPP Act"), which permits a public body to withhold information subject to legal privilege.

Relevant Alberta Rules of Court included Rule 10.41(1) (mandate to determine if costs are “reasonable and proper”), Rule 10.44 (right of appeal from an Assessment Officer’s decision), Rule 10.45(1) (powers of an appeal judge), Rule 10.38 (Assessment Officer’s authority to require particulars), and Rule 10.39 (permissive referral of questions to the Court). The Appellants argued that by seeking solicitor-and-own-client costs, the Respondent had implicitly waived privilege to the extent necessary for a meaningful assessment.

Outcome and analysis

Justice D.A. Labrenz found that the process before the Assessment Officer was procedurally unfair due to the limited disclosure provided to the Appellants. While the Assessment Officer and Respondent offered some oral summaries of the work performed, the Appellants were not given enough information to effectively challenge the claimed costs. The court held that by seeking solicitor-and-own-client costs, the Respondent had implicitly waived solicitor-client privilege to the extent necessary for the Appellants to assess the reasonableness of the fees. The court directed the Respondent to provide a revised Bill of Costs with additional details, including for each of the 32 persons: initials, working title/position, year of call (if applicable) or years in the profession, an explanation of their role/expertise, the standard hourly rate, the hourly rate billed, and a work description that is either a partially redacted narrative or a tailored neutral narrative.

The matter was remitted to a different Assessment Officer for a new assessment hearing, with instructions for more tailored disclosure to ensure procedural fairness. Each party was ordered to bear their own costs for the appeal. The total amount claimed by the Respondent in the Bill of Costs was $137,901.98, but the final amount to be awarded will depend on the outcome of the new assessment hearing, following the required disclosures.