CCS Corporation v. Secure Energy Services Inc., 2010 ABQB 737

Court of Queen ’ s Bench of Alberta Citation: CCS Corporation v. Secure Energy Services Inc., 2010, ABQB 737 Date: 20101125 Docket: 0701 13328 Registry: Calgary Between: CCS Corporation Applicant - and - Secure Energy Services Inc., Rene Amirault, Daniel Steinke, Nick Wieler, Gordon Getzinger, Gary Perras, Myron Newman, David Engel, Stan Moodie, Corey Higham, Karen Myrheim, Enerland Consulting Services Ltd., David Baldock, Pembina Pipeline Corporation and Triumph Epcm Ltd.

Respondent _______________________________________________________ Reasons for Judgment of the Honourable Chief Justice Neil Wittmann _______________________________________________________ [ 1 ] The Applicant Secure Energy Services Inc. (“Secure”) seeks an award of damages, or in the alternative solicitor-client costs in respect of legal fees it incurred in connection with the discharge of caveats filed by the Plaintiff CCS Corporation (“CCS”) against a number of Secure’s facilities. Background

[ 2 ] On April 7 th , 28 th and 30 th , 2010, I heard an application by CCS to amend its Statement of Claim to add certain particulars as well as a claim for a constructive trust over eight real estate properties (“facilities”) owned and operated by Secure. Secure opposed the application to add the claim for constructive trust on the basis that it was both hopeless and prejudicial.

In its written brief and in oral argument, Secure contended, inter alia , that the claim for constructive trust would permit CCS to place certificates of lis pendens on title to the Secure facilities, affecting the ability of Secure to deal with its properties, particularly in terms of future debt financing. [ 3 ] At the conclusion of the hearing, I reserved judgment on April 30 th , 2010. On May 4, 2010, while awaiting my decision, counsel for Secure conducted a Land Titles search.

That search disclosed the existence of five caveats registered by CCS in February and March, 2010 against four of Secure’s operating facilities. Because Secure is not on title as the owner of three of the facilities, Secure did not receive notice of the caveats filed against these properties. With respect to the fourth facility, Secure was listed on title as owner, but the address provided for Secure was a mail box address at Mail Boxes Etc., which Secure had previously used until it moved into its office in the fall of 2007.

Because of an oversight, Secure did not have its current address registered with the Land Titles Office and had not, therefore, received notice of caveat. [ 4 ] From May 4 to May 6, 2010 counsel for Secure worked to review the caveats, conducted legal research in respect of their validity and drafted some of the materials necessary to bring a motion to obtain their discharge. On May 5, 2010, counsel for Secure wrote to counsel for CCS to advise of the pending application. By written reply on May 6, 2010, counsel for CCS agreed to discharge the caveats.

In the interim, Secure had incurred solicitor-client fees in the amount of $7217.50 and disbursements of $120.50. [ 5 ] On July 13, 2010 I issued Reasons for Judgment in CCS Corporation v. Secure Energy Services Inc ., 2010 ABQB 466 , denying the application to add the claim for constructive trust to the Amended Statement of Claim. It was my determination that the constructive trust claim was hopeless.

I held that counsel may speak to the issue of costs if they were unable to agree on a disposition. [ 6 ] In argument before me on this application, and in subsequent correspondence, counsel for CCS explained why the existence of the caveats was not disclosed in the course of the three day hearing concluded April 30 th , 2010. He explained that, while he had initially found it curious that counsel for Secure had failed to acknowledge the existence of the caveats in its own brief and oral argument, he concluded that this was a tactical decision made by Secure’s counsel.

He reasoned that if Secure disclosed the existence of the caveats in the hearing before me, its argument regarding the potential prejudice of certificates of lis pendens would be undermined. [ 7 ] In short, counsel for CCS states he assumed that counsel for Secure had made a tactical decision to withhold information from the Court. Why counsel for CCS would choose not to inform the Court of facts that he had concluded would undermine Secure’s argument is not entirely clear.

Nor is it clear why counsel for CCS would conclude that Secure’s lawyers were engaging in the deliberate withholding relevant information from the Court. Legislation [ 8 ] Secure’s motion is brought pursuant to s.144 of the Land Titles Act , R.S.A. 2000, c.L-4 (LTA), and alternatively, the jurisdiction of this Court under the Alberta Rules of Court .

Section 144 of the LTA provides: 144 Any person, other than the Registrar, filing or continuing a caveat without reasonable cause is liable to make compensation to any person who may have sustained damage by that filing or continuation, and the compensation may be recovered by action if the caveator has withdrawn the caveat and no proceedings have been taken by the caveator or caveatee as provided in this Act, but if the proceedings have been taken then the compensation is to be decided by the court in the proceedings whether the caveat has been withdrawn or not. [ 9 ] The jurisdiction of the Court in respect of costs is set out at Rule 601: 601(1) Notwithstanding anything in Rules 602 to 612, but subject to any Rule expressly requiring costs to be ordered, the costs of all parties to any proceedings (including third parties), the amount of costs and the party by whom or the fund or estate or portion of an estate (if any) out of which they are to be paid are in the discretion of the Court, and when deciding on costs the Court may consider the

result in the proceeding and (

a) the amounts claimed and the amounts recovered, (

b) the importance of the issues, (

c) the complexity of the proceedings, (

d) the apportionment of liability, (

e) the conduct of any party that tended to shorten or to unnecessarily lengthen the proceeding, (

f) a party’s denial of or refusal to admit anything that should have been admitted, (

g) whether any step or stage in the proceedings was (

i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution, (

h) whether a party commenced separate proceedings for claims that should have been made in one proceeding or whether a party unnecessarily separated their defence from another party, and (

i) any other matter relevant to the question of costs.

(2) In awarding costs, the Court may (

a) fix all or part of the costs with or without reference to

Schedule C; (

b) award or refuse costs in respect of a particular issue or part of a proceeding; (

c) award a percentage of taxed costs, or award taxed costs up to or from a particular stage of a proceeding; (

d) award all or part of the costs (

i) to be taxed as a multiple or a proportion of any column of

Schedule C, or (ii) on a solicitor and client basis, or as a proportion of those costs;

(

e) award a gross lump sum instead of, or in addition to, any taxed costs (

f) award costs to one or more parties on one scale, and to another party or other parties on the same or another scale; (

g) direct whether or not any costs are to be set off.

(3) When no order is made, the costs follow the event, but the fact that a party is successful in a proceeding or a step in a proceeding does not prevent the Court from awarding costs against the successful party in a proper case. Analysis [ 10 ] Counsel for Secure concedes that Secure suffered no damages as a result of the wrongfully filed caveats, aside from the legal costs associated with preparing the application to have the caveats discharged, which did not proceed after CCS agreed to discharge the caveats voluntarily. Secure has cited Lundy and McLeod v. Powell , [1922] S.J.

No. 112 (C.A.) and Re/Max Real Estate Ltd. v. Dachlter , [1984] A.J. No. 882 (Q.B.) as authority for the proposition that the damages awarded for the actual loss caused by the wrongful filing or continuance of a caveat may include the solicitor and client costs arising out of the efforts to remove the caveat. [ 11 ] In Lundy , the trial judge had awarded damages in the amount of $5053.78, reflecting $5000 in carrying costs for the land over the duration of the caveat, and $53.78 paid by the plaintiffs to their solicitors to obtain the discharge of the caveat.

The Saskatchewan Court of Appeal reversed the award for carrying costs and, at para.39, fixed damages in the amount of $53.78, “being solicitors’ costs incurred in connection with the removal of the caveat.” [ 12 ] Lundy was followed in this Province by Shannon J. in Re/Max Real Estate Ltd. v. Dachlter , [1984] A.J. No. 882 (Q.B.) . In that case, the plaintiff sought to enforce a claim for a real estate commission, and the defendant counterclaimed on the basis that the plaintiff had wrongfully registered a caveat against their property.

Shannon J. dismissed the plaintiff’s claim, discharged the caveat on the basis that it was filed and continued without reasonable cause and awarded damages, at para.45, “in the amount of [the defendants’] actual loss caused by the filing of the caveat, that is to say, their solicitor and client costs pertaining to their efforts to obtain removal of the caveat...”. [ 13 ] CCS contends that Lundy and Re/Max Real Estate Ltd. are distinguishable because in those cases, proceedings had been taken to discharge the caveat.

Here, the caveats were discharged voluntarily by CCS upon receiving notice of an application to discharge by Secure. CCS says the costs cannot be considered damages under s.144 of the LTA because such a claim would require the commencement of an action by way of originating notice. CCS further submits that, in any event, there was reasonable cause for the filing of the caveats, notwithstanding my determination that the constructive trust amendment was hopeless, and that the claim before me is properly a claim for costs because it concerns the conduct of this litigation. [ 14 ] CCS has cited Nickol v. M.P.

Crushing Ltd. , 2003 ABQB 572 , [2003] A.J. No. 843 in support of the proposition that the filing of a caveat may, while wrongful, not be “without reasonable cause” pursuant to s.144 of the LTA . In that case, the defendant filed its caveat on the understanding that a lease agreement with the plaintiff had been renewed. After the plaintiff obtained an order to the effect that the lease had not been renewed and the caveat was discharged, he brought a second action seeking damages pursuant to s.144 of the LTA.

Burrows J. concluded that neither party appreciated that certain terms to the lease agreement had made the renewal invalid, and accordingly the defendant’s belief that it had validly exercised its right to file the caveat was reasonable. [ 15 ] The circumstances in this case differ from those in Nickol in meaningful ways. Absent the constructive trust claim that CCS sought to add to its Statement of Claim, there was no basis for the proposition that CCS had an interest in Secure’s facilities.

The caveats were filed on February 8, February 24, and March 1, 2010, well before the three day hearing concluded on April 30 th , 2010. CCS was aware, when the caveats were filed, that the addition of the constructive trust claim would be resisted by Secure and would likely require adjudication. It was open to CCS to wait until it heard from the Court on this question. Moreover, the constructive trust claim could not pass the very low hurdle posed by the test for amendments to pleadings. It follows from my conclusion that the constructive trust claim

was hopeless, that the filing of the caveats was unreasonable. [ 16 ] CCS further contends that the costs incurred by Secure could have been avoided entirely had Secure’s counsel chosen to contact counsel for CCS immediately upon learning of the existence of the caveats. In my view, it was not incumbent upon Secure’s counsel to make a request to have the caveats discharged without first having assessed the merits of Secure’s position. [ 17 ] I agree, however, that this is an interlocutory application in the context of an existing action concerning the alleged misuse of confidential information.

This application concerns the conduct of this litigation, and has not properly been brought as a claim for damages arising out of the conduct of the parties giving rise to this litigation. The claim is appropriately framed as a claim for costs on an indemnity basis, not damages. [ 18 ] I further agree that an award of costs on an indemnity basis should only be made in exceptional circumstances. CCS has directed me to Jackson v. Trimac Industries Ltd. (1993), 1993 CanLII 7031 (AB KB) , 8 Alta.

L.R. (3d) 403 (Q.B.), wherein Hutchinson J., at para.28, sets out a number of examples of cases wherein such an award was considered appropriate, including: 1. circumstances constituting blameworthiness in the conduct of the litigation... 2. cases in which justice can only be done by a complete indemnification for costs... 3. where there is evidence that the plaintiff did something to hinder, delay or confuse the litigation... 4. an attempt to deceive the court and defeat justice... [ 19 ] The caveats should not have been filed.

The existence of the caveats should have been disclosed at the hearing which concluded April 30 th , 2010. I can accept that counsel for CCS held the subjective belief that counsel for Secure had chosen not to inform the Court of the existence of the Caveats. Viewed objectively, however, this belief was not reasonable. Counsel for CCS had no reason to assume that counsel for Secure would, in violation of her professional duties, withhold this information.

The existence of the caveats would not have undermined Secure’s argument that the caveats or certificates of lis pendens could effect its ability to obtain financing. In my view, this failure to disclose constitutes both blameworthiness in the conduct of the litigation and an attempt to confuse it. Moreover, it is appropriate, in exercising my discretion, to take heed of s.144 of the LTA and the decisions in Lundy and Re/Max Real Estate , which collectively establish the recoverability of costs associated with the discharge of a caveat on an indemnity basis.

This matter is under case management, a process intended to bring some timeliness and efficiency to proceedings; there is nothing to be gained, in this context, from requiring Secure to bring an independent action to recover these costs by way of damages. [ 20 ] Secure is entitled to the costs and disbursements associated with the discharge of the caveats on an indemnity basis, the quantum of which is not contested in the sum of $7,338.00. [ 21 ] Costs of this application are awarded to Secure pursuant to Column 5 of

Schedule C. Heard on the 9 th day of September, 2010. Dated at the City of Calgary, Alberta this 25 th day of November, 2010.

Neil Wittmann C.J.C.Q.B.A. Appearances: M.H. Hollins, Q.C. J.L. Wilkins for the Applicant S. Carscallen, Q.C. Brent L. Robinson for the Respondent