581257 Alberta Ltd. Plaintiff - v. -, 2011 ABQB 539

Court of Queen ’ s Bench of Alberta Citation: 581257 Alberta Ltd. v. Aujla, 2011 ABQB 539 Date: 20110902 Docket: 0803 04677 Registry: Edmonton Between: 581257 Alberta Ltd. Plaintiff - and - Balwinder Aujla and Harwinder Aujla Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J. E. Topolniski _______________________________________________________ I.

Introduction [ 1 ] The parties ask for reconsideration of a costs award made after a five day trial in which the issues included when the Defendants pilfered from their employer's till and the amount they pilfered. The Defendant Balwinder Aujla was found liable for damages for conversion in the sum of $6,434.42. The Defendant Harwinder Aujla was found liable for $8,350 in damages. [ 2 ] In closing arguments, the Plaintiff asked for solicitor-client costs and cost consequences of the parties ’ respective notices to admit facts.

Unaware that a formal offer to settle had been made by the Defendants on December 9, 2009 [Offer], I ordered costs against the Defendants ( 581257 Alberta Ltd v Aujla , 2011 ABQB 39 ). The judgment roll has not yet been entered, however.

[ 3 ] The Offer was served on the Plaintiff on December 9, 2009, shortly after it obtained a partial

summary judgment award of about $2,600 plus interest against the Defendants collectively. The Offer was for $20,000, plus interest, plus costs and discontinuance of the Defendants' $45,000 counterclaim for defamation, which had been severed from the main action. The Offer specified that if it was not accepted, it automatically was withdrawn on the 45th day after service. [ 4 ] By the time the Offer was served, the pleadings had closed, affidavits of records had been filed, the partial

summary judgment award had been satisfied, and the Defendants had twice been examined for discovery. Six undertakings given by the Defendants were then outstanding. Four of the six undertakings concerned production of "unidentified deposits for the period 2001-2007" and tax information for the years 2001-2006. The undertakings were refused by letter dated January 25, 2010, two days after the Offer was withdrawn. [ 5 ] The Defendants now ask that the costs award be reconsidered to address their Offer.

They also seek an order setting aside a pre-judgment attachment order made April 25, 2008 (that subsequently was extended) and all costs associated with it. Conceding liability for the Plaintiff's costs to the date of the Offer, they ask that those costs be set at 75 percent of column 1 in

Schedule "C" of the Alberta Rules of Court . [ 6 ] The Plaintiff asks to have its experts ’ fees paid in any event of the outcome of the Defendants' motion. [ 7 ] Calculated on the basis of the face value of the award plus interest to the date of the Offer (and excluding the value, if any, of the discharge of the severed counterclaim), I find that the Plaintiff did not beat the Offer. I also find that the award is less than the $25,000 limit for trials in the Provincial Court of Alberta, Civil Division ( Provincial Court Civil Division Regulation , Alta Reg 329/89, s 1.1). II.

The Parties' Positions [ 8 ] The Defendants take the position that the Offer precludes the Plaintiff's recovery of costs after it was served with the Offer. They seek payment of all their disbursements incurred after service of the Offer, including their experts' fees. Arguing that the pre-judgment attachment order was overkill, they ask for their costs for the initial application and all subsequent attachment order renewals.

In terms of the Plaintiff's motion, they submit that its expert evidence was unhelpful and unreasonable. [ 9 ] The Plaintiff maintains that its retention of two experts was reasonable in all of the circumstances. As to the Offer, the Plaintiff submits that: (

a) the Defendants' application to reopen the case to address costs should be denied as the issue of costs was canvassed at trial; (

b) the Offer must fail since Rule 4.29(4) dictates that an offer to settle made under the Alberta Rules of Court cannot be considered if costs are ordered under Rule 10.31(b); and (

c) if the Defendants' application to reopen the case is allowed: (

i) in the event the Alberta Rules of Court , Alta Reg 124/2010, that came into force on November 1, 2010 [ New Rules ] apply, the Offer is defective as it fails to specify the particulars required by Rule 15.1(2); (ii) in the event the former Alberta Rules of Court , Alta Reg 390/1968 apply [ Former Rules ], the Offer is invalid for failing to comply with Rule 169; and

(iii) special circumstances exist in either event. III. The Issues [ 10 ] The following issues arise on the parties ’ cross-applications: A. Do the New Rules or the Former Rules govern the applications for reconsideration of the costs award and vacating of the pre- judgment attachment order? B. Should the parties' applications to reopen the case be granted in the circumstances? C. Is the Offer valid as a formal offer under the Rules of Court ? D. Is there a special reason why the court should not award the Defendants costs for all steps after the offer was served? E.

Can and should the court alter its earlier decision and award a lump sum to the Plaintiff? F. Should the Defendants pay for the Plaintiff's experts? G. Should the pre-judgment attachment order be vacated? H. Should the Plaintiff be awarded costs relating to the pre-judgment attachment order? I. What column of

Schedule C applies? IV. Analysis A. Do the New Rules or the Former Rules Govern the Applications for Reconsideration of the Costs Award and Vacating of the Pre-Judgment Attachment Order? [ 11 ] Rule 15.2(1) of the New Rules makes it clear that unless otherwise provided, the New Rules apply to every existing proceeding. Rule 15.1 provides that "existing proceeding" means a court proceeding commenced but not concluded under the Former Rules (see for example Broers v Real Estate Council of Alberta , 2010 ABQB 774 , 498 AR 190 ). [ 12 ] Rule 15.11 is the only transitional Rule concerning formal offers to settle. It provides:

15.11 A formal offer to settle an existing proceeding that was made and neither withdrawn nor accepted prior to the coming into force of these rules remains open for acceptance in accordance with the former rules. [ 13 ] The Offer here was withdrawn before the New Rules came into effect. [ 14 ] Rule 15.6 allows the court to suspend or modify operation of the New Rules if there is doubt about their application, or if their application would result in difficulty, injustice or impossibility.

It reads: 15.6 If there is doubt about the application or operation of these rules to an existing proceeding or if any difficulty, injustice or impossibility arises as a result of this Part, a party may apply to the Court for directions or an order, or the Court may make an order, with respect to any matter it considers appropriate in the circumstances, including: (

a) suspending the operation of any rule and substituting one or more former rules, with or without modification, for particular purposes or proceedings or any aspect of them; (

b) modifying the application or operation of these rules in particular circumstances or for particular purposes. [ 15 ] I find that, subject to relief that may be available under Rule 15.6, the cross-applications are governed by the New Rules [any reference to Rules in the remainder of this judgment will be to the New Rules , unless otherwise specified]. B.

Should the Case be Reopened? [ 16 ] Rule 9.13 permits the court to vary a judgment at any time before it is entered if there is good reason to do so. [ 17 ] The Plaintiff submits that counsel for the Defendants should have alerted the court in some way to the Offer without breaching the prohibition about disclosing the existence of such offer.

Rule 4.28(1) expressly requires that a formal offer to settle not be disclosed to the court until the offer is accepted or the remedy has been decided. [ 18 ] In my view, there is good reason to allow the cross-applications to reopen the case since the Offer was not disclosed prior to issuance of my Reasons for Decision. The Offer may affect all of the parties. [ 19 ] Allowing the parties' respective motions to reopen the case to hear their costs applications is reasonable in the circumstances. C. Is the Offer Valid as a Formal Offer under the Rules of Court ? 1.

Do the New Rules or the Former Rules govern this issue? [ 20 ] Rule 4.24(2) describes the information that must be contained in an offer to settle in order for it to be valid. It reads: 4.24(2) To be valid a formal offer to settle must be made within the period described in subrule (1), be in Form 22 and include the following information:

(

a) the name of the party making the offer; (

b) the name of the party or parties to whom the offer is made; (

c) what the offer is and any conditions attached to it; (

d) whether or not the amount of the offer is inclusive of interest and, if not, to what date and at what rate interest is payable underthe terms of the offer; (

e) whether or not the amount of the offer is inclusive of costs and, if not, the amount or scale of the costs and the date to which theyare payable under the terms of the offer; (

f) the requirements that must be complied with to accept the offer; (

g) a form of acceptance of the offer; (

h) notice of the costs consequences specified in rule 4.29. [21] These requirements differ from those under Rule 169(1) of the Former Rules, which provided: 169(1) At any time before the commencement of trial, a defendant may serve upon the plaintiff an offer of judgment specifying theterms upon which he is willing to settle a claim, or, where there is more than one, any one of them. [22] The failure of the Offer to comply with the informational requirements of Rule 4.29(2) is, in my view, not fatal to its validity.The Offer was crafted almost two years before the New Rules were enacted.

The legislators could not have intended that parties seekingto compromise their claims using a court process should be defeated for want of prescience. [23] Rule 15.6 has been mentioned as a fall back form of relief in Apex Safety Apparel Inc v Kel-Tek Safety Apparel, division ofKelsey Sportswear Ltd., 2011 ABQB 406 and Lindner v Chittick, 2010 ABQB 819, 1 RPR (5th) 142, although the court in both casesfound resort to that Rule unnecessary. [24] In my view, the facts of this case exemplify the raison d'être for Rule 15.6. I exercise my discretion to suspend the operationof Rule 4.24.

I will determine the validity and effect of the Offer pursuant to Rules 169 and 174(1) of the Former Rules. 2. Is the Offer genuine and certain? [25] Formal offers to settle under the Rules of Court must be certain and genuine. [26] In Laframboise v Billett, (1991), (AB KB), 81 Alta LR (2d) 285 at para 3 (QB) [Laframboise], McLean Jobserved that: The consequences of the rules as to costs contained in Pt. 12 of the Rules of Court are punitive and therefore demand a very high degree

of certainty and exactness. [27] Laframboise has been cited with approval in several cases, including Madge v Meyer, 2000 ABQB 156 at para 10, 259 AR351 [Madge]; Garand v Mutual Omaha Insurance Co., 2001 ABQB 964 at para 20, 297 AR 286 [Garand]; and Sidorsky v Lowry,2009 ABQB 197 at para 37, 463 AR 183. [28] The distinction between a genuine attempt to settle and a mere litigation tactic is discussed in Partec Lavalin Inc v Meyer,2002 ABCA 114 at paras 8-9, 303 A.R. 385.

An early offer to waive costs was considered a genuine attempt to settle in that case. [29] The Offer here states with certainty what was being offered to resolve the case. The Plaintiff's assertion that discontinuanceof the counterclaim renders the Offer uncertain fails. The Offer was made after the counterclaim was severed from the main action andthe sole issue was the costs consequences relating to the counterclaim. The Offer included interest and costs. [30] There is nothing to suggest that the Offer was disingenuous. Indeed, the trial result supports finding that, in fact, it wasgenuine. 3.

Withdrawal of the Offer [31] Rule 169(3) of the Former Rules, the withdrawal provision which applies here, read: 169(3) Where an offer of judgment has been made under subrule (1), it may not be withdrawn except in the following circumstances: (

a) within 45 days from service of the offer of judgment with leave of the Court, on notice to the plaintiff, in special circumstances; (

b) after 45 days from service of the offer of judgment, if no acceptance of the offer of judgment has been filed, by serving a noticeof withdrawal on the plaintiff [Emphasis added]. [32] The Offer in this case provided that it automatically was withdrawn on the 45th day after service if not accepted. [33] The Plaintiff looks to the language of Rule 169(3) of the Former Rules; McCardell Estate v Cushman (1990), (AB KB), 104 AR 23 (QB) [McCardell Estate]; and Chancellor Management Inc v Oasis Homes Ltd, [2002] AJ No1716 (QB)(QL) [Chancellor Management] as support for its argument that automatic withdrawal of the Offer rendered the Offer invalid.

TheDefendants distinguish the authorities relied on by the Plaintiff on their facts. [34] McCardell Estate involved an application by the executors named in two wills for probate of one or other of the wills. Theparty contesting the validity of both wills made an offer to settle.

The offer was withdrawn seven days after it was made and, by itsterms, was "thereafter null and void." McDonald J (as he then was) expressed the view that as the offer was withdrawn by its very terms,on not being accepted within a specified time, the party making it could not claim the benefit of Rule 174, which dictated that thedefendant be awarded costs for all steps in relation to the claim after service of the offer. He went on to find the compromise Rules wereinapplicable in any event given the nature of the case. [35] The issue in Chancellor Management was ownership of a copyright.

The question was resolved in favour of the defendantwhich had served an offer to settle that was open for acceptance until the start of the trial. The offer was neither accepted nor formallywithdrawn. In refusing to award the defendant double costs under the compromise Rules, Fraser J found the nature of the action was suchthat he could not say the offer was beaten since "…no numerical value for purposes of comparison attaches to the copyright or the

injunction which could be compared to a zero value of the dismissal" (at para 22). He determined the defendant should receive costs oncolumn 3 of

Schedule C since the "matter must be approached as if there had been no offer of judgment which would bring intooperation Rule 174(1)(b)" (at para 24). [36] Subsequent to these cases, an amendment to Rule 174(1)(

b) of the Former Rules expanded its reach to include non-monetaryjudgments. McCardell Estate and Chancellor Management are distinguishable on that basis. [37] WA Stevenson and JE Côté in their Alberta Civil Procedure Handbook (Edmonton: Juriliber, 2004) state at p 156: “[a]n offermay say that it will expire at a certain point and so long as that is not less than 45 days away, it is effective,” citing as authority of theirCivil Procedure Encyclopedia (Edmonton: Juriliber, 2003), ch 32, Pt K.3, which in turn refers to JC Damar Developments Ltd v EcecInc (1994), 1994 ABCA 323 , 157 AR 259, 31 CPC (3d) 9 (CA).

The Alberta Court of Appeal in that case held that imposingthe requirement of a formal notice of withdrawal would unduly complicate the

summary scheme underlying the Rule itself (at para 5),and a party should be able to limit the life of an offer when the offer is made and not be put to the inconvenience of having to formallyserve a notice of withdrawal (at para 7). [38] I find the mere fact of an automatic withdrawal of the Offer did not render the Offer invalid. [39] In a letter to counsel dated July 12, 2001, I asked the parties to address whether withdrawal of the Offer on the 45th day afterservice complied with the compromise Rules and, if it did not, what the effect was of such non-compliance. [40] The Plaintiff submits that the Offer in this case was invalid as it did not comply with Rule 169(3), which required that anoffer remain open for acceptance for 45 days after service, unless leave of the court was obtained, on notice to it, in specialcircumstances.

The Plaintiff relies on McJane Developments Ltd v Kazanecki, 2003 ABQB 584, 345 AR 378 [McJane] and Collins vNational Life Assurance Company of Canada (1995), 1995 ABCA 332 , 174 AR 206 (CA) [Collins] in suggesting that theRules of Court have displaced the common law rules of settlement.

However, it submits that even if “common law offers” continue toexist outside of the Rules of Court for costs purposes, the circumstances here are not such that the court should exercise its discretion toaward the Defendants costs as the Offer was withdrawn before all of the undertakings were fulfilled and the Defendants did not come tocourt with clean hands. [41] The Defendants argue that the Offer clearly was intended to be a

Part 12 Offer under the Former Rules and could not be withdrawn until the end of the 45th day after service. They note that a similarly worded offer was accepted as being a valid offer underthe Former Rules in Edmonton (City of) v Lovat Tunnel Equipment Inc, 2002 ABQB 1033 at para 170, 328 AR 314 [Lovat]. Theycontend that McJane is at odds with Collins and is wrongly decided, or is distinguishable from the present case.

Even if the Offer heredid not comply with the Rules of Court, the Defendants maintain that Rule 601 gives the court broad discretion in awarding costs and,given they offered to settle the matter and the Plaintiff would have received more if it had accepted the Offer, it should pay the costs ofthe trial. [42] In Lovat, the plaintiff argued that the defendant’s offer did not comply with Rule 169(3) as it did not remain open toacceptance for the full period mandated by the Rules.

The offer in that case provided that: "... if no acceptance of the within Offer hasbeen served within 45 days of the service of the within Offer, the within Offer shall be considered to be automatically withdrawn at theinstance of the Defendant Rotek." Lee J held at paras 170-171 that: In my view, the Offer can only be interpreted to mean that it was open for acceptance up to and including the 45th day after service. Ifnot accepted, the Offer was to be considered automatically withdrawn on day 46. The City made no attempt to accept the Offer eitherprior to or on Day 45.

On day 46, the Offer was withdrawn in accordance with its terms and as allowed by the Rules. [43] In Davidson v Patten, 2008 ABCA 65 at para 58, 425 AR 186, the Court of Appeal determined that the trial judge in thatcase had not erred in finding that an offer made by the defendants had been validly withdrawn because the letter in which they purportedto make the revocation was sent at 4:30 p.m. on the 45th day.

The court commented that this did not reduce the 45 days required for theoffer to be open as provided in Rule 169. [44] Unlike the situation in Lovat and Davidson, in the present case there is no basis on which to infer that the Offer remained

open for acceptance until the close of business on the 45th day. As such, withdrawal was one day too soon. [45] The question arises as to whether early withdrawal of the Offer other than in accordance with Rule 169(3)(

a) invalidated theOffer as a formal offer of settlement under the Rules of Court or simply was ineffective in revoking the Offer. [46] In Brown v Shortreed Estate (1988), 1988 ABCA 5 , 86 AR 265 (CA), Stevenson JA, for the Court of Appeal,expressed the view that oral revocation of an offer made by the defendants under Rule 169 was ineffective as an unqualified offer is notrevocable within the 45 day period barring an abridgement of time (emphasis added).

However, he commented that: “[i]t might bedifferent if the offer reserved a power of earlier revocation.” At the time, Rule 169(3) simply read: “Where no acceptance has been filed,the defendant may, by serving notice of withdrawal upon the plaintiff, withdraw the offer at any time after 45 days from service of theoffer.” [47] The Court of Appeal in Collins v National Life Assurance Company of Canada (1995), 1995 ABCA 332 , 174 AR206 (CA) [Collins] was concerned with the question of whether a counter-offer by the plaintiff to an offer made by the defendantpursuant to Rule 169 amounted to a rejection and, therefore, a termination of the offer.

The defendant in that case refused the counter-offer and the plaintiff then purported to accept the defendant’s offer. The court commented at paras 8 to 10: This Rule and the other settlement rules provide their own procedure for the making of the offer, the method of acceptance, thewithdrawal of the offer, the enforcement of any agreement to settle, as well as the duration of the offer and penalties for the failure toaccept the formal offer later found to have been reasonable.

As pointed out by Taggart J.A. in Smith v Acadia (BCCA), [1983] 6 W.W.R. 462, there are two different systems of settlement agreements, the formal offers of settlement governed by theRules of Court and the informal rules governed by common law. This rule and others in the same category are clearly intended to encourage settlement of lawsuits and to offer cost advantages to thoseparties genuinely interested in making a settlement offer. The rules must not be so interpreted as to defeat this purpose.

If counter-offersor discussions with a view to negotiate are taken to be firm refusals of any offer so made, the rule will discourage not encouragesettlement efforts. An offer of settlement made pursuant to s. 169, can only be terminated by compliance with the procedure provided in the Rule, bywritten notice, unless the expiry date beyond the 45 day minimum is set out in the offer. (See J.C. Damar Developments Ltd., v EcecInc. and Ecal Ltd. (October 7, 1994), Doc. Edmonton Appeal 9303-0616-AC (Alta.

C.A.). [Emphasis added.] [48] In KEM Presentations Inc v Shell Canada Products Ltd (2001), 2001 ABQB 389 , 290 AR 166, appeal denied2003 ABCA 217, 330 AR 153 [KEM], the issue before the court was whether an offer made under Rule 169 could be withdrawn early ifthere was material non-disclosure by the plaintiff.

The offer specified that it was “open for acceptance until the close of business onFebruary 18, 2000, at which time, the Offer will be automatically withdrawn.” Clark J referred to Collins, but was of the view itprimarily concerned the effect of counter-offers on an offer under Rule 169, an issue which was distinct from the question before him.He concluded (at para 29) that the defendant was entitled to withdraw the offer in the circumstances, given the material non-disclosure. [49] On appeal, the majority held at para 8 that: We acknowledge that this Court has established that the Rules of Court signify an intent to displace the common law rules of settlement:Collins v National Life Assurance Co. (1995), 1995 ABCA 332 , 33 Alta.

L.R. (3d) 403. However, neither of those cases metthe requirement in Rule 169 for serving written notice. In this case, that requirement has been met. Moreover, neither case deals with theeffect of a material non-disclosure. Given that factor, we agree with the majority of the British Columbia Court of Appeal which held that Rules of Court are the servants and not the masters of the court and that the Court's duty is to interpret them so as to do justice betweenthe parties: See Smith v Acadia Hotels Ltd., (BC CA), [1983] 6 W.W.R. 462 at 466 (B.C.C.A).

Rule 169 is not intended to impose settlements upon unwilling parties .

To deny revocation despite material non-disclosure would discourage reasonable offers of settlement and defeat the intent of that rule. [Emphasis added.] [ 50 ] O ’ Leary JA, in dissent, took the view (at para 14) that when an offer under Rule 169 is stated to be open for acceptance until close of business on a specific date, the offer cannot be withdrawn unilaterally except on very special grounds. [ 51 ] In McJane , the court held that a written withdrawal of an offer prior to the 45 day period was effective as it was motivated by the offeror's discovery of new information.

Kenny J reasoned that the rule encourages settlements by providing cost advantages, not by imposing settlements. At para 16 she stated: The benefit of the rule accrues to the offeror who is rewarded with substantial costs in the event that the offeree does not receive more that the offer after trial. That benefit is lost to the offeror upon revocation [before the 45 day period].

There is no loss or prejudice to the offeree where the offer is revoked before acceptance. [ 52 ] In 2004, possibly in response to KEM and McJane , Rule 169(3) was amended by adding a provision allowing for withdrawal of an offer within 45 days from service, with leave of the court, on notice to the plaintiff, in special circumstances. [ 53 ] In my view, the amendment clarified that an offer made under Rule 169 could not be withdrawn other than as set out in Rule 169(3)(

a) of (b).

An early withdrawal which did not comply with one or the other of those provisions did not invalidate the offer, but was ineffective in revoking the offer. [ 54 ] I note that the combined effect of Rules 4.24(3) and (4) of the New Rules is that a formal offer to settle remains open for acceptance for the period of time designated in the Rules of Court unless the court first gives permission for its early withdrawal, which may be given only if the court is satisfied that there are special circumstances that justify withdrawal, and written notice of withdrawal is served on the parties who received the offer. [ 55 ] I find that the Offer in this case was a valid offer of settlement under the Former Rules , and it was neither accepted nor validly withdrawn.

As a result, the Defendants are entitled to receive the benefit of Rule 174 unless there is some special reason not to award them costs for all steps after the Offer was served. D.

Is there a Special Reason Why the Court Should Not Award the Defendants Costs for All Steps after the Offer was Served? [ 56 ] Rule 174(1) of the Former Rules provided that where the plaintiff did not recover a judgment more favourable than the offer of judgment made by the defendant, the court was to, unless for special reason, award costs to the defendant for all steps in relation to the claim after service of the offer. [ 57 ] The Plaintiff in the present case asserts that the following are special reasons which warrant not giving effect to the Offer: 1.

There should be costs consequences because the Defendants failed to admit certain facts set out in the Plaintiff ’ s notice to admit and those facts were later proven at trial, punishment by way of costs consequences should be imposed. 2. The timing of the Offer precluded the Plaintiff conducting a reasonable assessment of its value. 3. The Defendants were guilty of misconduct.

4. The issues at trial were difficult. [ 58 ] The Alberta Court of Appeal in Davidson v Patten , 2008 ABCA 65 at para 60 , 425 AR 186 held that the trial judge in that case had exercised his discretion reasonably in finding no special reasons to avoid awarding costs to the defendant pursuant to Rule 174(1).

The trial judge had noted that any reasons relied on must be truly exceptional. [ 59 ] In Reid v Stein , 1999 ABQB 222 , 253 AR 90 [ Reid ] , Johnstone J listed a number of reasons offered in relation to Rule 174, which were not accepted as “ special reasons, ” including (in some cases) the lateness of the offer, double costs placing the plaintiff in a deficit position, the lack of necessary information to assess the offer, contractual terms requiring litigation to settle the issue, and the amount recovered being close to the amount offered.

Successful reasons listed included conduct of the parties, making an offer on an item by item basis and then attempting to rely on a global total, and a complex and conditional offer with mixed success at trial. [ 60 ] Watson J (as he then was) in Garand at paras 44-48 referred to the lists of reasons set out by Johnstone J in Reid . In refusing to find that the parties' disparate financial circumstances constituted a "special reason," he observed (at para 49) that to make such a finding would undermine the logic and purpose of the compromise Rules, which are designed to discourage unmeritorious actions.

He commented that a litigant who insists on proceeding to trial must bear the financial consequences of pursuing that course of action. 1. Notice to admit facts [ 61 ] I dealt with the Plaintiff's notice to admit facts in my previous Memorandum of Decision in this case ( 2011 ABQB 39 at paras 107-109 ). There is no reason to revisit the topic. Even if there was, I would come to the conclusion that the notice to admit facts and the Plaintiff ’ s establishment at trial of the methods used by the Defendants to convert money does not constitute a special reason to avoid giving effect to the Offer. 2.

Timing of the Offer [ 62 ] The Plaintiff complains that it could not reasonably assess the Offer given the Defendants ’ six outstanding undertakings, four being to account for "unidentified bank deposits" and to provide tax information for 2001-2006. It asserts that this information was critical to its proposed method of proving its damages, which was based on its theory that every dollar in the Defendants' several bank accounts that they could not account for was stolen from it. [ 63 ] I do not accept this as a special reason to deny the Defendants costs.

The Plaintiff's approach to proving its damages hinged on it establishing that the Defendants (both store clerks) were fiduciaries or convincing the court to accept a novel approach entailing comparison of the moneys held by the Defendants in their bank accounts with their assets and annual declared income for tax purposes. Ultimately, both approaches were rejected by the court (Memorandum of Decision at paras 37-88). [ 64 ] While the Plaintiff was the victim of the Defendants' conversion and is outraged that it had to sue the Defendants to recover its property, it chose how to frame its damages claim.

It chose to allege that the Defendants pilfered each and every day that they worked for it (eight years for Balwinder Aujla and four years for Harwinder Aujla). It chose to proceed on this basis without any "hard evidence" of pilfering before June 2008. It chose to allege that the Defendants were its fiduciaries.

While some of these choices may have been driven by the Plaintiff's business practices, it was the Plaintiff's decision to proceed with what evidence it possessed. [ 65 ] The Plaintiff's claim that it could not reasonably assess the Offer as it had not received the Defendants' expert's report is not a special reason to negate the effect of the compromise Rules. Rule 218.1 of the Former Rules specified the timelines for delivery of expert reports. Rule 8.4(3)(

c) of the New Rules simply provides that a trial date cannot be requested until the parties have exchanged their expert reports. 3. Misconduct

[66] The Plaintiff complains of misconduct on the part of the Defendants, including their conversion of its money, their failure tocompletely admit to their wrongdoing, their refusal to provide certain information asked of them pre-trial without the need for a courtorder, and their lying at trial.

It relies on 642718 Alberta Ltd v Alberta (Minister of Public Works, Supply & Services), 2005 ABQB810, 390 AR 193 [642718 Alberta] and the trial decision in Polar Ice Express Inc v Arctic Glacier Inc, 2007 ABQB 717, 434 AR 261,appeal dismissed on the merits but allowed in part as to costs 2009 ABCA 20 [Polar Ice] to support its argument that such misconductconstitutes a special reason to avoid the Offer. [67] In 642718 Alberta, Read J found special reasons to avoid ordering double costs to a victorious party whose pre-litigationconduct was considered reprehensible.

Noting that there was no case law directly on point, she reasoned (at para 25) that if conductduring the litigation was an acceptable reason to deny or reduce costs to a successful party, logically the conduct of a party before thelitigation process should also in some rare circumstances constitute a "special reason" to depart from the normal requirements of Rule174(1). [68] 642718 Alberta was decided before the Court of Appeal’s decision in Polar Ice (2009 ABCA 20, 446 AR 295), whichoverturned the award of solicitor-client costs made by the trial judge to address pre-litigation misconduct.

The Court of Appeal made itclear (at para 21) that such misconduct may not be considered as a basis for an award of solicitor-client costs (except possibly when atrust or fiduciary relationship is involved). However, it confirmed that misconduct during the course of the litigation could justify suchan award.

In allowing solicitor-client costs for steps taken once the trial began, the court took into consideration the defendant’simproper denial of discovery of records on a material point and the fact that its witness lied under oath during examination for discovery.The court expressed the view (at para 25) that this was serious misconduct which lengthened and made the trial more difficult, andpossibly even necessitated the trial as it impeded settlement. [69] In Waste Management of Canada Corp v Thorhild (County), 2009 ABQB 157 at para 14, 463 AR 193, Ross J noted that thethreshold for an award of solicitor and client costs based on misconduct of a party during the proceedings is very high.

Generally, theconduct must be "reprehensible, scandalous or outrageous” (Young v Young, (SCC), [1993] 4 SCR 3, 108 DLR (4th)193). [70] The Plaintiff’s allegations of misconduct in the present case are mainly addressed in my previous Memorandum of Decision(at paras 99-100 and 105-106). I need not repeat what was said there. The only allegation that was not addressed is that the Defendantsdid not voluntarily answer all of the pre-trial questions put to them by the Plaintiff.

That act alone or in combination with otherallegations and findings of misconduct is insufficient to constitute a special reason to depart from the otherwise mandatory application ofthe compromise Rules. 4. Difficulty of the issues [71] Citing Brock v Brock (1998), 22 AR 79 at 81 (QB) [Brock] as authority, the Plaintiff says that the issues to be determinedwere difficult and, as such, a special reason to avoid the Offer. Brock involved a high conflict custody dispute. The father's offer to settlewas filed essentially on the eve of trial.

Burrows J held that the mother's inability to agree with what was in the child's best interests,coupled with the last minute offer, were sufficient to depart from Rule 174(1). [72] Brock is wholly distinguishable from the present case. [73] The parties’ animosity towards one another is insufficient ground to find that the issues here were difficult. This was a caseof employee theft. There was nothing unique about it. Any difficulty for the Plaintiff was attributable to its limited evidentiary base. [74] In the result, I find that there are no special reasons to avoid operation of the compromise Rules. E.

Can and Should the Court Alter its Earlier Decision and Award a Lump Sum to the Plaintiff?

[75] The Plaintiff now suggests that the party-party costs initially awarded be converted into a lump sum. [76] Rule 4.29(40)(

a) of the New Rules provides that the Rules relating to the costs consequences of a formal offer to settle whichis not accepted do not apply if costs are awarded on an indemnity basis or as a lump sum under Rule 10.31(2)(b). [77] The Plaintiff's suggestion is untenable. When I ordered party-party costs, I was unaware of the Offer. The sole design of thisproposal is to defeat the compromise Rules. I need say no more. F.

Should the Defendants Pay for the Plaintiff's Experts? [78] The Plaintiff seeks to have all of its experts' fees paid by the Defendants irrespective of the outcome of the suit or operationof the compromise Rules. The experts' fees are double the value of the judgment. [79] The Plaintiff retained one expert, its certified general accountant, David Prasad, at the outset. He accompanied the Plaintiff'sprincipal and counsel to a meeting with the Defendant Balwinder Aujla on February 4, 2008, when her employment with the Plaintiffwas terminated.

According to his accounts, by March 16, 2009 he had analyzed the Defendants' bank accounts, conducted a payrollanalysis and prepared a spreadsheet cross-referencing the Defendants' deposits. He reported to corporate counsel on May 27, 2009.Including GST, his account for that work was $16,970.62. [80] On further instructions from the Plaintiff's principal, Mr. Prasad then compared seven years of the Defendants’ bank depositsand tax returns, reporting to the Plaintiff's litigation counsel on March 10, 2010. His account for that work, including GST, was$6,457.50. [81] Between August and October 2010, Mr.

Prasad met with various individuals to discuss the Defendants' expert's report andprepared his own report about it. He also met with litigation counsel and attended the trial for two days. For this work, his account was$8,623.10. [82] Colin Presizniuk was the Plaintiff’s other expert. He too is a certified general accountant. However, unlike Mr. Prasad, hehad experience working on employee theft cases for his small business clients. [83] Sometime after July 30, 2010, Mr. Presizniuk was retained specifically to address the Defendants' expert's report . He alsoreviewed Mr.

Prasad's report for accuracy of calculations, met with the Plaintiff's principal and litigation counsel, and attended court forfour days. His accounts totalled $14,280. [84] Mr. Prasad's novel approach to assessing the Plaintiff's damages was rejected at trial, as was Mr.

Presizniuk's critique of theDefendants' expert's report. [85] The Plaintiff relies on the well established principle that the reasonableness of retaining an expert must be assessed at thetime the decision to do so was made and given the state of knowledge which existed then (see Viridian Inc v Dresser Canada, Inc, 1998ABQB 687 at para 4; and Seidel v Kerr, 2004 ABCA 157, 348 A.R. 154, citing Nova, an Alberta Corp v Guelph Engineering Co(1988), (AB KB), 89 AR 363 (QB)). [86] I find that it was reasonable for the Plaintiff to retain one or more experts to assist in its calculation of damages.

The Plaintiffis entitled to the taxable disbursements for Mr. Prasad's fees for services performed between February 5, 2008 and December 9, 2009.His fees for the February 4, 2008 meeting are not included as that meeting was not in relation to the litigation but rather was to confrontand terminate the Defendant Balwinder Aujla.

[ 87 ] While it was reasonable for the Plaintiff to retain experts, that is not a justifiable basis for deviating from the operation of the compromise Rules. As a result, the Plaintiff is not entitled to the taxable disbursements for the fees of either of its experts relating to work undertaken after the date the Offer was served. G. Is the Plaintiff Entitled to Costs Relating to the Pre-Judgment Attachment Order? [ 88 ] Mr. Justice Graesser left the question of costs relating to the pre-judgment attachment order (and its extensions) to the trial judge to determine.

Unlike Graesser J, I did not have the benefit of hearing those applications. I have, however, been advised that the Plaintiff's principal swore an affidavit deposing to his belief that the Defendants stole large sums of money, sent money to India, and bought lands there. Ultimately, those facts were not proven at trial. [ 89 ] On an application for pre-judgment relief, the court is not looking for proof of the acts alleged.

Rather, it must be satisfied that there is a "reasonable likelihood" the plaintiff's claim will be established and that there are reasonable grounds for believing the defendant is dealing with exigible property other than for living expenses and in a way that may hinder enforcement proceedings ( Civil Enforcement Act , RSA 2000, c. C-15, s 17 [ CEA ]). Obviously, Graesser J was satisfied of such and I see no reason to depart from the usual practice of having the costs follow the cause.

The Plaintiff is entitled to its costs until December 9, 2009 in relation to the pre- judgment attachment order applications made under the CEA . H. What Column of

Schedule C Applies to the Costs Award? [ 90 ] Typically, costs are calculated on the basis of

Schedule C of the Rules of Court . However, if an action is within the jurisdiction of the Provincial Court and the judgment does not exceed that court's jurisdiction, Rule 10.42 of the New Rules is triggered. It provides as follows: 10.42(1) This rule applies only to actions the subject-matter of which is within the jurisdiction of the Provincial Court.

(2) Despite anything in this Division or

Schedule C, unless the Court otherwise orders, (

a) in the case of an action brought in the Court of Queen's Bench for which the amount sued for or the amount of the judgment or order does not exceed the amount for which the Provincial Court has jurisdiction under

section 9.6 of the Provincial Court Act , the costs to and including judgment or order must be assessed, if at all, at not more than 75% of the amount specified in Column 1 of the tariff in Division 2 of

Schedule C; (

b) in the case of an action described in clause (a), post-judgment matters are to be assessed, if at all, at not more than 100% of the amount specified in Column 1 of the tariff in Division 2 of

Schedule C. [ 91 ] The amount of the judgment in this case is within the Provincial Court's jurisdiction ( Provincial Court Civil Division Regulation , Alta Reg 329/1989 s 1.1). However, an action alleging conversion is not ( Provincial Court Act , RSA 2000 c P-31, s 9.6). Accordingly, Rule 10.42 does not apply. [ 92 ] I have considered the factors set out in Rule 10.33 of the New Rules (which essentially tracks Former Rule 601(1)), and have addressed the notices to admit facts in connection with other considerations [ 93 ] I conclude that the Plaintiff is entitled to the full amount of its

Schedule C, column 1 taxable costs up to December 9, 2009 and its disbursements (which for the reasons set out above include its expert ’ s fees) incurred up to December 9, 2009.

[ 94 ] The Defendants ’ Offer was genuine. There are no specials reasons why it should not be take into consideration in assessing costs. Therefore, the Defendants are entitled to their costs and disbursements after December 10, 2009, pursuant to Rule 174(1)(

b) of the Former Rules . In my view, there is no reason to deviate from calculation of the Defendants' costs in accordance with column 3 of

Schedule C, which is the column that applies to the amount of damages claimed by the Plaintiff in its statement of claim. The Plaintiff gave no indication that its claim might be worth something less than what was pled until closing argument (Schedule C, s 1(3); Laube v Juchli , 1998 ABCA 319 at para 17 , 228 A.R. 81 ; Robinson v Williams Estate , 2005 ABQB 970 at para 33 , 385 A.R. 284 ). I. Should the Pre-Judgment Attachment Order be Vacated? [ 95 ]

Section 17 of the CEA governs the granting of a pre-judgment attachment order. It is an extraordinary remedy with significant consequences. [ 96 ] The pre-judgment attachment order initially was granted ex parte by Graesser J. He later extended it, with small modifications, until October 31, 2008, on an opposed review application. It was further extended three times to the end of November 2010 (when the trial was expected to end). The order prohibited the Defendants from dealing with any exigible assets, including land and bank accounts, or beneficial interests in assets.

An order was granted permitting the sale of one parcel of land owned by the Defendants on condition the Plaintiff would be consulted on the listing price and all net proceeds would be paid into court. Mr.

Justice Graesser left the issue of costs to be determined by the trial judge. [ 97 ] Section 17(6) of the CEA provides that: 17(6) An attachment order shall not attach property that exceeds an amount or a value that appears to the Court to be necessary to meet the claimant's claim, including interest and costs, and any related writs, unless the Court is of the view that such a limitation would make the operation of the order unworkable or ineffective. [ 98 ] Section 19(1) of the CEA addresses termination of an order. It reads: 19(1) Subject to

section 18 and except as otherwise ordered by the Court, an attachment order terminates on whichever of the following occurs first: (

a) on the dismissal or discontinuance of the claimant's proceedings; (

b) on the 60th day from the day of the entry of a judgment in favour of the claimant. [ 99 ] Evidence adduced at trial established that the Defendants were, for obvious reasons, inconvenienced by the pre-judgment attachment order. The order prohibits them from dealing with any of their property, which I heard at the trial was valued in the hundreds of thousands of dollars. The award in favour of the Plaintiff is for a fraction of that amount.

The pre-judgment attachment order also affected the Defendants' son and a parent who were the beneficial owners of money in bank accounts held in the Defendants' names. [ 100 ] The pre-judgment attachment order will lapse automatically pursuant to CEA , s 19(1)(b). In the interim, however, there is no valid reason to continue its broad reach. I decline to set the order aside as the Defendants urge. Rather, I modify it to prohibit them from disposing of $20,000 in assets. To facilitate this, they may post that amount in court or with their counsel until the attachment order dies its natural death under s 19(

b) of the CEA, at which time the monies will be paid out in accordance with the CEA and any other relevant legislation.

V. Conclusion [ 101 ] The following conclusions have been reached: 1. The parties' applications to reopen the case are granted. 2. The Plaintiff ’ s application to have the party-party costs award converted to a lump sum is denied. 3. The Defendants ’ Offer was a valid offer of settlement under the Former Rules and was neither accepted nor validly withdrawn. The Defendants are entitled to the benefit of Rule 174(1)(

b) of the Former Rules as there is no special reason why they should not receive costs for all steps in relation to the claim after service of the Offer. 4. It was reasonable for the Plaintiff to retain one or more experts to assist in its calculation of damages. The Plaintiff is entitled to the taxable disbursements for Mr. Prasad's fees for services performed between February 5, 2008 and December 9, 2009.

As a result of the compromise Rules, the Plaintiff is not entitled to the taxable disbursements for the fees of either of its experts relating to work undertaken after the date the Defendants ’ Offer was served. 5. The Plaintiff is entitled to its costs until December 9, 2009 in relation to the pre-judgment attachment order applications made under the CEA . 6. The Plaintiff is entitled to the full amount of its

Schedule C, column 1 taxable costs up to December 9, 2009 and its disbursements (which for the reasons set out above include its expert ’ s fees) incurred up to December 9, 2009. 7. The Defendants are entitled to their

Schedule C, column 3 costs and disbursements after December 9, 2009, pursuant to Rule 174(1)(

b) of the Former Rules . 8. The pre-judgment attachment order is modified to prohibit the Defendants from disposing of $20,000 in assets. They may post that amount in court or with their counsel pending the natural expiration of the order under s 19 of the CEA , at which time the monies will be paid out in accordance with the CEA and any other relevant legislation. 9. The parties may speak to me concerning the costs of this application within 60 days of this decision. Heard on the 11 th day of July, 2011. Dated at Edmonton, Alberta this 2 nd day of September, 2011.

J. E. Topolniski J.C.Q.B.A. Appearances: Shawn Beaver for the Plaintiff Brian Doherty for the Defendants