As a general rule, a successful party to litigation will be entitled to costs payable by the unsuccessful party. In cases where there are only plaintiff(s) and defendant(s), costs are relatively straightforward and follow the default rule: the unsuccessful party pays costs of the successful party. The principle behind costs awards is logical: a successful plaintiff should not have to bear the costs of advancing a successful action, nor should a defendant have to bear the costs of defending an unsuccessful claim.

The normal rule is that a plaintiff whose claim is unsuccessful against the defendant will not be charged with the costs of the third party. This flows from the fact that in the case of a third party claim, the defendant is, in essence, the claimant. In many cases, the Plaintiff has no right of recovery from the third party and the defendant is the one who brought in the third party. The plaintiff did not sue the third party, did not want him in the case, and was not responsible for joining him.

In Milina v Bartsch, [1985] CarswellBC 136, McLachlin J, as she then was, outlined four circumstances where it may be appropriate to stray from the normal rule and award third party costs payable by an unsuccessful plaintiff rather than by the successful defendant:

1. Where the main issue litigated was between the plaintiff and the third party.
2. Where the third party was brought or kept in the matter by reason of the act or neglect of the plaintiff.
3. Where the case involves a string of contracts in substantially the same terms for the sale of goods.
4. Where the third party proceedings follow naturally and inevitably upon the institution of plaintiff’s action, in the sense that the defendant had no real alternative but to join the third party.

The reasoning in Milina has been followed in British Columbia (Berg v Elkousky Construction Co. Ltd., 2005 BCSC 1012; Lucky Trading Co. Lucky Snow Enterprises (Canada) Ltd v Icicle Seafood, Inc., 1998 CanLII 5597 (BCSC)), Alberta (Spartek Systems Inc. v Brown, 2015 ABQB 190; Weatherall v Seaba, 2009 ABQB 173), Ontario (Sanofi Pasteur Limited v UPS SCS Inc., 2015 ONCA 88; Greater Toronto Airports Authority Association Inc. v Foster Wheeler Limited, 2011 ONSC 3377), and Saskatchewan (1348623 Alberta Ltd. V Choubal, 2016 SKQB 200).

The general rule developed through the common law is summarized in Mark M. Orkin, The Law of Costs, 2d ed (Aurora, Ont.: Canada Law Book, 1987), has been cited in B.C., Saskatchewan and Ontario courts:

The discretion of the court to award costs against an unsuccessful litigant extends as well to third parties. Thus, a plaintiff whose action has been dismissed may be ordered to pay the costs of the third party in addition to those of the defendant, depending on the circumstances of the case. The usual rule is that the unsuccessful plaintiff will not be burdened with the costs of the third party on the reasoning that the plaintiff did not sue the third party, did not want him or her in the case and was not responsible for joining the third party. Depending on the facts of the case, however, fairness may require that an unsuccessful plaintiff bear a successful third party’s costs.

In Sanofi Pasteur Limited v UPS SCS, Inc., 2015 ONCA 88, the court confirmed that whether an unsuccessful plaintiff should be ordered to pay a third party’s costs depends on the circumstances of the particular case and the discretion to order such costs must be exercised judicially (para 77). The court goes on to state that in Milina, McLachlin J. did not set out an exhaustive list of situations where a plaintiff can be ordered to pay a third party’s costs (para 84) as was made clear by the court in Guarantee Company of North America v Resource Funding Ltd., 2009 CarswellOnt 4583, at paragraphs 6 and 7

One must be careful, however, not to treat the statement of Justice McLachlin as a code encompassing the only situations in which a plaintiff may be ordered to pay the costs of a third party. I do not think that she intended to do that and certainly she did not say so. Justice McLachlin was describing situations in the past in which such costs order was made. I agree with the following statement of Koenisberg J. in Nichols v. Koch Oil Co. (2000), 2 C.P.C. (5th) 77 (B.C. S.C.):

The four examples of such circumstances as set out in Milina are in my view very broad, but are not exclusive. They are merely illustrations of situations in which Courts up to that time had awarded third party costs against plaintiffs.

Matters of discretion can never be closely proscribed although there are obviously general principles to be considered and followed.

The court in Emmott v Your Community Realty Inc., 2016 ONSC 7446, followed Sanofi and Milina and determined that the plaintiff was liable for the third party costs because the third party claim naturally and inevitably flowed from the institution of the main action. In that case, the defendant was successful in the main action, and did have two reasonably strong defenses to the plainitff’s claim. The court said:

[T]his case includes the peculiar feature where the plaintiff has sought relief against the third party, Fairfield, without actually naming it as a party defendant. Not only that, but the plaintiff was well aware that her $100,000 had been paid to Fairfield. Royal LePage was just the middleman. A reasonable plaintiff would undoubtedly anticipated that Royal LePage would turn to the ultimate recipient of the funds for recovery. In my view, this is a clear case where the third party claim naturally and inevitably flowed from the institution of the main action.

In Weatherall v Seaba, 2009 ABQB 173, the court accepted the principles stated in Milina, though ultimately deciding that none of the enumerated exceptions in Milina applied.

In 1348623 Alberta Ltd. V Choubal, 2016 SKQB 200, the court accepted the reasoning as applied and developed in Sanofi, Milina, and Guarantee Company. The court in finding that the plaintiff ought to be responsible for the costs of the third parties found that:

Given what the plaintiff was obliged to prove (and failed to prove) to succeed in this action, the presence of the third parties was inevitable.

As can be seen by a review of the above case law, whether it is appropriate to follow the general rule with respect to third party costs is assessed on a case-by-case basis. Importantly, the courts have confirmed that the exceptions to the general rule are not closed.