Torode Realty v. Winfield Power, 2010 ABQB 729

Court of Queen ’ s Bench of Alberta Citation: Torode Realty v. Winfield Power, 2010 ABQB 729 Date: 20101124 Docket: 0703 16256 Registry: Edmonton Between: Torode Realty (Edmonton) Ltd. Plaintiff/Applicant - and - Winfield Power Company Ltd. Defendant/Respondent _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice D.L.

Shelley _______________________________________________________ Introduction [ 1 ] Torode Realty Inc. (“Torode”) was successful at trial and was awarded the full amount of its claimed commission of $42,667.36, together with prejudgment interest and costs from Winfield Power Co. (“Winfield”). Pre-judgment interest amounts to about $1,000.00. Torode seeks double costs under R. 174(2) of the Alberta Rules of Court (1968) [1] , on the basis that it had served an offer to settle of $42,000.00, plus costs but with no interest, just before the matter went to Examinations for Discovery.

Winfield argues that this was not a “genuine” offer as it was not enough of a compromise to come within the Rule. The parties’ submissions

The parties’ submissions [ 2 ] Torode relies on the Alberta Court of Appeal decision in Allen (Next friend of) v. University Hospital Board , 2006 ABCA 101 , which held that an offer must be “genuine” before double costs will be awarded. Torode also refers to the decision in Petrowski v. Petrowski Estate , 2009 ABQB 753 , 476 A.R. 171, in which Moen J. found that the offer was genuine because the defendant made the offer at a point in time in which the plaintiff should have known that his position was weak based on the evidence.

Here, Torode notes that, although this offer was made before Examinations for Discovery, its case was strong. Torode concedes that the difference between the amount claimed and offered was not great, but that at this point (before discoveries) the costs were low, and Torode did not seek interest. [ 3 ] Winfield also relies on Allen , arguing that a genuine offer must contain some element of compromise, and that there was no compromise in this offer since it was very close to the amount Torode sued for.

In Allen , the Court held that an offer to give up only five per cent of the amount recovered at trial was insufficient to constitute compromise. Further, Winfield argues that the Court of Appeal held that an offer that is nothing more than a “litigation strategy” is not genuine. The nominal offer made here, early in the litigation, was only a strategy to obtain costs, not a reasonable offer. Further, it argues that the offer was presented minutes before the beginning of Examinations for Discovery, before Winfield’s position was even known to Torode.

Analysis What is a genuine offer? [ 4 ] The Rules require that double costs are payable for all steps in relation to a claim after service of notice of a Formal Offer where an offeror recovers judgment more favourable than the amount offered unless there are “special reasons”. The Court of Appeal has held that to constitute a Formal Offer, an offer must be genuine: Allan . There is some uncertainty as to whether a genuine offer must include an element of compromise: Tonizzo v. Moysa , 2007 ABQB 379 at para. 23 . [ 5 ] In Phillips v.

Nagy , 2007 ABCA 58 , the Court of Appeal questioned whether compromise was necessary, but concluded that it was unnecessary to answer in the circumstances of that case (at para. 7): We acknowledge that some authority of this court refers to the need for the offer to include a genuine offer of compromise: Allen (Next Friend of) v. Mueller , 2006 ABCA 101 , (sub nom. Allen v. University Hospitals Board ), 384 A.R. 23. However, other authority raises the question whether the lack of compromise is critical to the imposition of the double costs sanction: Jones v.

Trans America Life Insurance Co. of Canada (1996), 1996 ABCA 165 (CanLII) , 184 A.R. 120, 39 Alta. L.R. (3d) 1 (C.A.). Other jurisdictions appear to treat the lack of compromise as one factor only in determining whether there exists special reason to detract from the costs sanction: Data General (Canada) Ltd. v. Molnar Systems Group Inc . (1991), 1991 CanLII 7326 (ON CA) , 85 D.L.R. (4th) 392 (Ont. C.A.).

We find it unnecessary to resolve this issue in this case since we have concluded that the Offer clearly contains an element of compromise sufficient to meet even the test referred to in Allen. [ 6 ] In Jones the Plaintiff served an offer to settle before appeal for the amount awarded at trial, with interest and costs. The Court of Appeal held that there was nothing in the Rules confining formal offers to concessions or reductions in claims (at para. 4).

The Court goes on (at para. 5): Would one refuse to consider a payment in (or offer) by the defendant before trial equal to the amount claimed in the statement of claim? Surely not; the Rules forbid that distinction. Defendants have always been allowed to pay into Court a small coin, or to offer to accept a discontinuance in return for no costs.

If a defendant can do that, why can a plaintiff not do the equivalent? [ 7 ] The Court then goes on to discuss the rationale for formal offers: “...to prevent further litigation when one of the parties before trial is content with an amount no more favourable to him than the amount which is right in law” (para. 8), and to promote settlement in the sense that “a party bears heavier consequences if it gambles and loses. (para. 9). Importantly, the Court notes (at para. 9):

It is no part of our policy to induce a plaintiff to take less than is owing where she has a solid case and is willing to stake her money on being right, and is proved right at trial . Any such inducement would be backwards and unjust. The Rules are designed to put pressure on the party who is right, not the one who is wrong. (Emphasis added) [ 8 ] The Court, having decided that the offer in question was a Formal Offer for the purposes of the Rule, even though it did not present any concession from the trial award, then went on to briefly address “special reasons” to deny double costs.

In particular, the Court noted that on the facts it was unnecessary to determine whether: 1. offering precisely the same amount as recovered; 2. offering the same amount as the claim; or 3. offering the same amount of the judgment appealed constituted “special reasons” (para. 20).

This suggests that the Court considered that those questions were relevant to the question of “special reasons”, not to the “genuineness” of the offer. [ 9 ] Allen considered facts similar to those in Jones : the Plaintiffs (respondents on appeal) offered to settle for the amount recovered at trial, less $107,000.00, thereby forgoing 5% of the amount recovered at trial. The offer was withdrawn after the facta were filed and the appeal hearing scheduled. In Allan, the parties had agreed on quantum of damages, and the trial and appeal were only in regards to issues of liability.

The factors the Court considered included that the respondents risked incurring substantial liability for costs if the appellants were successful, the grounds of appeal were seriously arguable, the fact that the oral hearing took more than a day and reserve reasons took six months “attested to the merits of the appeal,” the appeal result was “truly unpredictable and uncertain”, and the offer to give up 5% did not reflect the relative strengths of the parties’ positions.

The Court concluded that the offer was not genuine, but a litigation tactic. [ 10 ] In Allan , the Court summarized a number of propositions from a number of its decisions dealing with double costs on appeal: 1. To be genuine, an offer of settlement made pursuant to

Part 12 must include an element of compromise: Re Blue Range Resources Corp . (2000), 281 A.R. 351 (C.A.), 2001 ABCA 177 at para. 1 ( Allan, para. 15); 2. An offer to settle for the full amount of a liquidated claim plus judgment interest and costs to the date of service of the offer cannot be characterized as a genuine offer as it lacks an element of compromise: Labbee v. Peters , 2000 ABCA 176 ( Allan at para. 15); 3.

Likewise, an offer to accept the full amount of a trial judgment plus interest and costs to the date of service is not a genuine offer to compromise an appeal: Blue Range , supra at paras. 11 and 13. ( Allan, para. 15); 4. An offer of settlement that does not realistically reflect the relative merit of the parties' positions at the time it is made is not a genuine offer. It is one made without any reasonable expectation that it will be accepted and for the sole purpose of invoking the double costs sanction: Kerr v.

Kerr (2000), 293 A.R. 384 (C.A.), 2001 ABCA 152 ( Allan at para.16). [ 11 ] In Blue Range , two of the Respondents made formal offers to allow the exact amount of the claims allowed by the chambers judge, and the third offered to abandon its appeal without costs. The offers were refused and the appeal was dismissed. The respondents sought double costs. The Court concluded that R. 170 did not compel the Court of Appeal to award enhanced costs if (at para. 13):

...the offers to settle were not genuine offers of compromise where the only options extended to the appellants were to proceed with the appeal or not . There was no room for compromise . Unlike Labbee , there was not even an offer to forego post-judgment interest. (Emphasis added) [ 12 ] I note that in Labbee the Court of Appeal expressly did not pursue consideration of whether an offer to settle pre-trial for the full amount of a liquidated claim or, pending appeal, for the full amount recovered at trial, qualified as a genuine offer of compromise within the meaning of the Rules.

It assumed, without deciding, that the respondent’s offer for the full amount of the judgment, interest and costs awarded at trial was a genuine offer of compromise. In doing so, the Court referenced the decision in Jones . [ 13 ] Further, the Court in Allan did not set out a strict rule requiring compromise (at paras. 15 and 17): Where a settlement offer does not contain an element of compromise, the court may nevertheless consider it to have been reasonable in the circumstances and exercise its discretion to award enhanced costs. ...

The assessment of an offer's genuineness is not confined to a consideration of whether it was made honestly and in good faith. The fact it contains an element of compromise, although necessary and relevant, may not be determinative. The genuineness of an offer must be assessed as at the time it was served and remained open and its character cannot be decided by simply comparing it to the result of the trial or appeal. That is only one factor to be considered.

Other factors that may be relevant include the amount or nature of the settlement offer relative to the relief claimed or the judgment at trial, the relationship of the proposed settlement to an objective view of the relative merit of the positions of the parties, and the timing of the offer in relation to the commencement of the trial or hearing of the appeal. None of these factors, or any other single factor, is necessarily conclusive.

An assessment of whether an offer was or was not genuine requires an examination of all of the surrounding circumstances, subjective and objective, existing at the time the offer was served and remained open, as well as the outcome of the trial or appeal. [ 14 ] There is some ambiguity in Allan , since para. 15 provides that a court may consider enhanced costs even if there is no compromise, if the offer was reasonable in the circumstances, but para. 17 indicates that an element of compromise is necessary. Since the Court of Appeal appears to have left the question open in its subsequent decision in Philpps v.

Nagy , I will consider whether there was an element of compromise in the offer as one of the factors to take into account, but not a necessary one. [ 15 ] In

summary, the factors to take into account include those set out by Moen J. in Petrowski (at para. 21 ), by Smith J. in Tonizzo (at paras. 25 and 28 ), by McMahon J. in Marathon Canada Ltd. v. Enron Canada Corp. , 2008 ABQB 770 (at para. 47 ), and by Nielsen J. in Rances v. Scaplen , 2009 ABQB 390 (at para. 28 ). Was the offer: 1. reasonable and realistic in the circumstances at the time it was served and remained open; 2. a realistic reflection of the relative merit of the parties' position at the time it was made; 3. made honestly and in good faith; 4. made solely for the purpose of obtaining double costs or was there a reason to expect that the offer might be accepted;

5. in relation to a claim that had been advanced at the time of the offer; 6. a sufficient compromise in the circumstances; and 7. a genuine attempt to eliminate the need for the plaintiffs to participate in a liability trial? Was this offer genuine? [ 16 ] Torode sued Winfield for a commission that it claimed was owed as a result of the sale of certain property.

At trial there were two issues: whether Torode was contractually entitled to a commission from a certain sale agreement and if so, whether it was disentitled to the commission because it was not explicitly disclosed that Torode was acting as an agent for both buyer and seller. [ 17 ] Torode and Winfield were brought together when Winfield asked Torode to find a tenant for one of its properties, and the tenant/purchaser was referred to Torode by its lawyer. Mr.

Belter, Torode’s president, did not explicitly disclose that he was acting as agent for both, but both Winfield and the purchaser knew that he was the only realtor involved. The purchaser originally leased the property, and Torode received a leasing commission. [ 18 ] The purchaser then elected to exercise its option to purchase under the lease agreement. It entered into a sale agreement that indicated that it was exercising its option and it paid a deposit of $100,000.00. The purchaser was unable to close on the scheduled date and Winfield granted two extensions.

On the date of the first extension, Torode sent a letter to Winfield requesting payment of its commission arising from the sale agreement, having heard that the option to purchase had been exercised. [ 19 ] Two days following the expiry of the second extension, Winfield informed the purchaser that it would proceed with the sale only if new documents were prepared at a slightly higher price. The new document’s

preamble stated that the purchaser “has not been in a position to exercise its Option to Purchase”. The first deposit was not returned and no new deposit was paid. The sale was completed within days, but Winfield never paid Torode the commission from the sale. [ 20 ] On both issues, Torode’s case was strong. On the first question, I found that Winfield had deliberately purported to terminate the sale agreement, only to immediately enter into a “new’ one on essentially the same terms, in order to avoid paying the commission.

On the second issue, the evidence was clear that all the parties knew that Torode was the only realtor involved, even if it was not expressly disclosed. [ 21 ] In Marathon Canada Ltd. , McMahon J. noted that where the offeror has a “solid case”, a plaintiff’s offer to accept the full amount plus costs and interest may be a compromise (at para. 47), and further notes that in a simple debt case with few documents and uncomplicated facts, an offer at an early stage may be genuine. [ 22 ] In my view, it was reasonable and realistic for Torode to make the offer as early as it did.

Although the offer was made before discoveries, Torode could well have expected Winfield to accept the offer, since it was in possession of the same facts as Torode. Both parties were aware of the circumstances surrounding the sale and Winfield knew that there was only a single realtor involved. [ 23 ] The offer reflected a realistic reflection of the relative merit of the parties' position. As the Court of Appeal noted in Jones , why should a plaintiff offer to take less than is owing where it has a solid case and is willing to stake money on being right?

It was reasonable to expect that Winfield, having reviewed the Statement of Defence and the produced documents, might accept the offer. [ 24 ] Moreover, I conclude that there was a sufficient compromise here given the strength of Torode’s case. Torode agreed to forgo almost a full year’s interest and compromised its claim by a further $667.36; this is approximately a 4% reduction in its claim. In Jones the offer was for the full amount of the trial judgment plus costs and interest, saving any further costs (at para. 6), and this was sufficient for double costs.

In Phillips the difference between the ultimate judgment and the offer ranged between 4.7% and 7.2%, and the Court of Appeal awarded double costs.

Conclusion [ 25 ] I conclude that the offer was a genuine offer for the purposes of the Rules and award double costs to Torode from the date of the offer. Heard on the 26 th day of October, 2010. Dated at the City of Edmonton, Alberta this 23 rd day of November, 2010. D.L. Shelley J.C.Q.B.A. Appearances: Gary B. Romanchuk Ogilvie LLP for the Plaintiff Francoise H. Belzil Belzil Law Office for the Defendant [1] This application was heard on October 26, 2010, and the Alberta Rules of Court (2010) came into effect on November 1, 2010. Under the transitional rules, R. 15.12, the former rules continue to apply to this application.