Condominium Corp. No., 2011 ABQB 489

Court of Queen ’ s Bench of Alberta Citation: Condominium Corp. No. 9813678 v. Statesman Corp., 2011 ABQB 489 Date: 20110728 Docket: 0401 08466 Registry: Calgary Between: Condominium Corporation No. 9813678, Condominium CorporationNo. 0013062, Condominium Corporation No. 9911158, CondominiumCorporation No. 9911560, Condominium Corporation No. 0112632,Mary Vanderogt, Catherine Sliwa, Trevor MacFarlane, KirkMcFee, Terry S. Shibley, Rob Watson, Charles Gray, Norma Gray,Lloyd B. MacDonald, Scott James Francis, Harry Radomsky,Danielle Marchant, Michael Klassen, Douglas A.

Pounder, PierreSchrifee, Paul Foley, Leo Bouckhout, Richard Dyjack, JamesSmith, Pamela Smith, Stephanie Bischsel, Bernie Rabwowich,Susan Rabwowich, Ryan Birmingham, Alberta Wireless 2002 Inc.,John Boehm, David MacMartin, Jack Clayton, Audrey Clayton, TomPearson, Kathleen Millard, Jason Salmon, Michael Morrison,Michael Johnson-Stewart, Tanya Johnson-Stewart, RaymondDaniels, Andrew Course, Cathy O'Bright, and Brian DavidHassett, Plaintiffs - and - Statesman Corporation, 893137 Alberta Ltd. formerly known asStatesman Construction Corporation and the said StatesmanConstruction Corporation, The City of Calgary, BurgenerKilpatrick Design International Also Known As BKDI Architectsand formerly known as BLK Architects and the said BKDIArchitects and BLK Architects, Peter G.

Burgener, GrahamHarmsworth Lai & Associates, Ltd., David Graham, The AdvancedGroup Calgary Ltd., Advanced Waterproofing Inc. carrying onbusiness under the trade name of and/or style of The AdvancedGroup Calgary and the said Advanced Waterproofing Inc.,Michael Adams carrying on business under the trade name and/orstyle of The Advanced Group Calgary, Michael Adams carrying onbusiness under the trade name and/or style of Delta-ProtechMembrane Installations, Calvin Schieve carrying on businessunder the trade name and/or style of Delta-Protech MembraneInstallations, Dean Sziva carrying on business under the tradename and/or style of Cactus Waterproofing & Roofing, and KarlSwan, Defendants _______________________________________________________ Ruling of the Honourable Mr.

Justice J.D.B. McDonald Relating to Application for Leave to Appeal Award of Costs _______________________________________________________ Introduction [ 1 ] This is an application brought by Statesman pursuant to Rule 505(3) seeking leave to appeal the award of costs made against it in this matter. The ruling regarding costs is reported at 2010 ABQB 501 , 489 AR 37 and 2010 ABQB 504 , [2010] AJ No 875 . [ 2 ] Specifically Statesman seeks leave to appeal to the Court of Appeal on two matters:

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i) the Bullock order against Statesman with respect to the City of Calgary ’ s costs and the denial of Statesman ’ s right to recover any of the City of Calgary costs from the Advanced Group or Cactus, Sziva and Swan; and (ii) the denial of Statesman ’ s right to seek recovery of its own costs for the plaintiffs ’ costs incurred after January 12, 2009 from the Advanced Group or Cactus, Sziva and Swan. [ 3 ] The substantive action that gave rise to the costs in question involved a very large fire that occurred on May 30, 2002 in the Erlton District in the City of Calgary.

The facts relating to that law suit were recited in considerable detail in the trial decision which is reported at 2009 ABQB 493 , 472 AR 33 . [ 4 ] During this application the Court was advised that no appeal was taken from the trial judgment and matters were concluded amongst the parties on the basis of that decision. Accordingly leave to appeal must now be sought with respect to the issue of trial costs. [ 5 ] There were two discrete claims advanced by the plaintiffs herein.

In the first claim, the plaintiffs were suing Statesman, the Advanced Group, Sziva and Swan based upon the alleged negligence of the workman Swan which started the fire in question (the fire negligence claim). [ 6 ] The second discrete claim advanced by the plaintiffs was against the City on the grounds that the City had, in bad faith, improperly approved a deficient design for the project in question and but for the City ’ s improper approval of that deficient design, the fire in question would not have occurred (the building regulations claim). [ 7 ] The trial judgment held as follows with respect to these two claims: 1.

The fire in question was caused by the negligence of Swan for which his employer Sziva and Cactus were vicariously liable. 2. Torch-on waterproofing was an inherently dangerous activity given the facts since the torch-on waterproofing was by necessity done in close proximity to a combustible material, i.e. the vertical wooden walls of the structure. As a result, neither Statesman nor its sub-contractor the Advanced Group could escape liability for the negligence of the workman Swan. 3.

The plaintiffs were entitled to judgment for the amount of their respective damages against Swan, Sziva, Cactus and the Advanced Group jointly and severally. 4. All the plaintiffs, apart from Condominium Corporation 9813678 and Condominium Corporation 0013062, were also entitled to judgment against Statesman for the amount of their respective damages. 5. Statesman was entitled to indemnity from the Advanced Group, Sziva, Cactus and Swan for any liability imposed on it arising out of the negligence of Swan. 6.

Similarly, the Advanced Group was entitled to indemnity from both Sziva, Cactus and Swan for any liability imposed upon it. Finally, Cactus and Sziva were entitled to indemnity from Swan. 7. The City did owe a duty of care to the plaintiffs in this case, but the City did not act in bad faith and accordingly no liability attached by virtue of

Section 12 of the Safety Codes Act. 8. In any event, the actions and the conduct of the City did not cause or contribute to the fire or resultant damages in question. The plaintiffs ’ claim as against the City was therefore dismissed.

[ 8 ] Costs were not addressed in the Reasons for Judgment. As a result, the matter of costs was argued before me on July 15, 2010. At that time, court was advised that the City ’ s revised bill of costs was acceptable to both counsel for the plaintiffs and counsel for Statesman. Furthermore, plaintiffs ’ counsel advised that neither he nor counsel for Statesman were taking issue with the “ doubling up ” effect of Rule 169 and 174 with respect to the offer of judgment that had been served by counsel for the City on December 18, 2008.

Counsel for the plaintiffs also clarified his position with respect to the City ’ s claim for costs and advised that he was only seeking a Bullock order (and not a Sanderson order) and that only against the defendant Statesman. [ 9 ] After hearing submissions of counsel, I made the following order with respect to costs: 1. the City was entitled to recover from the plaintiffs the costs set forth in its revised Bill of Costs on the enhanced basis as previously specified. Furthermore, the City was entitled to have its costs for the period subsequent to December 18, 2001 doubled in accordance with Rules 169 and 174.

These costs related to the building regulations claim; 2. the plaintiffs were entitled to a complete indemnity from Statesman for these costs with no right on the part of Statesman in turn to seek to recover these costs from any other party; 3. the plaintiffs were entitled to recover from Statesman, the Advanced Group, Cactus, Sziva and Swan jointly and severally their costs properly relating to the fire negligence claim only; and 4.

Statesman was entitled to recover its costs from the Advanced Group, Cactus, Sziva and Swan for all steps taken in the fire negligence claim up to January 12, 2009 but not thereafter. After that date, Statesman, the Advanced Group, Cactus, Sziva and Swan were to bear their own costs.

Statesman was to reimburse the Advanced Group, Cactus, Sziva and Swan to the extent that any of them have actually paid costs to the plaintiffs for steps taken in the proceedings subsequent to January 12, 2009. 2010 ABQB 501 at para 64 [ 10 ] The day following the filing of 2010 ABQB 501 , counsel for the Advanced Group (with full concurrence of counsel for Cactus, Sziva and Swan) wrote a letter stating in part: Specifically, Advanced Group seeks as against Cactus its own costs for the entire action and indemnity for any costs liability to other parties in light of its judgment for indemnity against Cactus. [ 11 ] The claim for costs against Cactus, Sziva and Swan was not addressed by counsel for the Advanced Group during oral submissions although it was briefly adverted to in his written argument.

Counsel agreed that the matter could be dealt with simply by a further memorandum of costs. [ 12 ] As a result of those further submissions, the order regarding costs was varied as follows: 5. as between the Advanced Group on the one hand, and Cactus, Sziva and Swan on the other hand, each defendant or group of defendants (in the latter case) were ultimately to be responsible as between themselves for 50 percent of those costs i.e. 50 percent to be ultimately borne by the Advanced Group and 50 percent to be ultimately borne by Cactus, Sziva and Swan.

I granted a right of contribution to each defendant (or group of defendants) to effect that result. 6. Regarding any claim that Cactus and Sziva had for costs against Swan, in light of the almost certain fact that Swan ’ s only asset was the insurance coverage, I exercised my discretion and declined to award any costs over against Swan in favour of Cactus and Sziva.

2010 ABQB 504 at paras 12 and 13 Analysis and Ruling [ 13 ] Counsel for Statesman advised the court that when the doubling effect is taken into account, the amount of costs awarded in favour of the plaintiffs as against Statesman is approximately 1.7 million dollars. He further advised that the denial of Statesman ’ s entitlement to its costs from the Advanced Group and Cactus, Sziva and Swan for the period after January 12, 2009 amounted to a further $326,000. [ 14 ] In considering whether to grant leave to appeal costs, the court should consider the applicable standard of review.

In an appeal from an order for costs, an appellate court will not interfere unless there is a clear, palpable and overriding error: Gutierrez v Jeske , 2005 ABQB 971 , 396 AR 1 at para 7 . [ 15 ] Madam Justice Morrow in Huang v Drinkwater , 2005 ABQB 272 , 47 CCPB 53 at para 4 references a four part test for such leave applications: (

i) the applicant must identify a good, arguable case having enough merit to warrant scrutiny by the court; (ii) the issues must be important, both to the parties and in general; (iii) the appeal must have some practical utility; and (iv) the court should consider the effect of delay in proceedings caused by the appeal. [ 16 ] Madam Justice Morrow went on to state at para 14 of Huang : It would appear from these authorities [reviewed by her] that leave should be granted sparingly, and only in circumstances where there is a good arguable case that the judge erred in law or failed to exercise her discretion judicially. [ 17 ] Costs are discretionary and leave is not granted merely to provide a forum to repeat the same arguments.

The applicant bears a significant burden: Roman Catholic Bishop of the Diocese of Calgary v Canada (Attorney General) , 2009 ABQB 231 , [2009] AJ No 857 at para 5 . [ 18 ] It is axiomatic that discretion must be exercised judicially, not capriciously, arbitrarily or with bias. It is not however a question of whether another court might come to a different conclusion but whether the decision was a judicial exercise of discretion: Roman Catholic Bishop v Canada at para 8. [ 19 ] In regard to the four part test referenced in Huang v Drinkwater , it seems to me that parts (iii) and (iv) are met.

Specifically with respect to part (iii), the appeal does have practical utility inasmuch as the disputed amount of costs exceeds two million dollars. With respect to part (iv), there is no delay of consequence inasmuch as the matter on its merits has now been concluded. [ 20 ] Applying part (ii), obviously the issues involved have importance to the parties involved in this case and perhaps to the public in general as well. This therefore leaves the issue as to whether the applicant has identified a good, arguable case having enough merit to warrant scrutiny by the court.

Bullock Order Against Statesman [ 21 ] The Bullock order costs pertain to the building regulations claim. Statesman argued that the trial judge erred in law in failing to address the three point test for an application for a Bullock order. This test has been adopted in, inter alia , McAteer v Devoncroft

Developments Ltd , 2003 ABQB 425 , 340 AR 1 and O ’ Meara v Yule , 2004 ABQB 151 , 355 AR 67 . Statesman further argued that while it agrees there was no reason to deprive the City of its costs, including double costs from the plaintiffs which arose as a result of its offer of judgment pursuant to rule 169, that the “ double costs ” ought not to be passed on to Statesman.

The reason for this, Statesman argued, is that it had no input or say as to whether the plaintiffs refused or accepted the City ’ s offer. [ 22 ] Statesman went on to argue that the trial judge erred in law in failing to consider whether Statesman, as an unsuccessful defendant, was wholly responsible for the action and should be liable to the City for its costs (para 24 of written submissions). Statesman went on to argue (para 28 of its submissions) that it did not plead or allege that the City was the cause or contributed to the damages incurred by the plaintiffs. This is simply not true.

In fact, as specifically referred to in paragraph 48 of my costs ruling, 2010 ABQB 501 , States man leveled some very specific allegations of blame against the City. [ 23 ] It is also of note that counsel for Statesman opposed the City ’ s non-suit motion brought at the end of the plaintiffs ’ case. He argued the issue of bad faith and urged upon the court an expanded or broad

interpretation of that phrase by citing two Supreme Court of Canada authorities, Barreau du Quebec v McCullock-Finney , 2004 SCC 36 , [2004] 2 SCR 17 and Enterprises Sibeca Inc v Frelighsburg (Municipality) , 2004 SCC 61 , [2004] 3 SCR 304 . Furthermore, at trial at page 1912, counsel for Statesman stated: But my liability, if I can find contribution from the City, it will reduce, of course, any exposed liability Statesman has. And for those reasons I am clearly adverse in interest.

This stands in sharp contrast to the actions of the defendants, the Advanced Group, Cactus, Sziva and Swan, who took no role whatsoever in the building regulations claim. [ 24 ] In my view, Statesman has not established that there was any error in law in my direction that a Bullock Order should issue in favour of the plaintiffs for the costs owed by them to the City on the building regulations claim.

However, there is an interesting argument raised as a subset thereto, namely, whether Statesman should be responsible for the reimbursement of the “ double costs ” which are approximately $488,000. [ 25 ] Accordingly, I grant leave to Statesman to argue this specific issue of costs i.e. should Statesman be liable to the plaintiffs for the double costs arising subsequent to the date of the City ’ s offer of judgment since Statesman had no control over whether the plaintiffs would accept it or not.

In light of my ruling on this point, I will decline any further comment regarding the merits or otherwise of this issue. Denial of Statesman ’ s Entitlement to its Costs from Advanced, Cactus, Sziva and Swan after January 12, 2009 and Reimbursement of any Costs Payable by Those Parties to the Plaintiffs after January 12, 2009 [ 26 ] These costs pertain to the fire negligence claim.

In the Memorandum of Costs 2010 ABQB 501 at para 38 , I awarded costs of that claim in favour of the plaintiffs as against Statesman, the Advanced Group, Cactus, Sziva and Swan jointly and severally. [ 27 ] I then went on to direct that as regards these costs, Statesman was only entitled to recover its costs from the Advanced Group, Cactus, Sziva and Swan for all steps taken in the action up to January 12, 2009 (being the date the trial commenced) and not thereafter.

Subsequent to that date, Statesman, the Advanced Group, Cactus, Sziva and Swan were directed to pay their own costs, although with the right of indemnity being accorded to the Advanced Group to recover its costs from Cactus, Sziva and Swan. [ 28 ] The explanation for this ruling was discussed at paras 51 - 63 of the Memorandum of Costs, 2010 ABQB 501 .

The ruling was based in part upon the fact that counsel for the Advanced Group had forwarded to counsel for the plaintiffs a letter dated July 15, 2008 containing terms of a proposed settlement (the Calderbank offer) which stated in part as follows: Practically, all of the Plaintiffs and Defendants would have to agree to this proposal. If accepted, we would then seek leave of the trial

judge prior to the commencement of the trial to withdraw from participation in the trial in light of the agreement. None of the plaintiffs accepted the offer nor did Statesman consent. However, prior to the trial, all the other plaintiffs did settle and the trial only proceeded with respect to the plaintiffs in this one action. [ 29 ] Again, counsel for Statesman raises an interesting argument.

He argues that his client ought not to have been deprived of its full costs against the Advanced Group, Cactus, Sziva and Swan in the fire negligence claim since it was granted a full right of indemnity with respect to the amount of the damages. He argues in part that the trial judge relied on a lack of consent by Statesman to the Calderbank offer when in fact all of the plaintiffs in the thirty-six actions had to agree, which did not occur. I will grant leave on this point and likewise will decline any further comment on the merits or otherwise.

Conclusion [ 30 ] Therefore leave is hereby granted to Statesman to appeal the following two issues: (

i) was it proper or appropriate for the Bullock order to include the double costs which required Statesman to pay an extra $488,000 approximately; and (ii) was it appropriate to deny Statesman its costs of approximately $326,000 pertaining to the fire negligence action for the period subsequent to January 12, 2009. Heard on the 12th day of April, 2011. Dated at the City of Calgary, Alberta this 27th day of July, 2011. J.D.B. McDonald, J. Appearances: J.W. Rose, Q.C (Fraser Milner Casgrain LLP) for the Plaintiffs Norman Machida (Machida Mack Shewchuk Meagher LLP) for Statesman

Paul J. Stein (Gowling Lafleur Henderson LLP) for The Advanced Group J.A. McDougall, (Scott Hall LLP) for Cactus, Sziva and Swan