Clancy v. Gough, 2011 ABQB 778

Court of Queen ’ s Bench of Alberta Citation: Clancy v.

Gough, 2011 ABQB 778 Date: 20111214 Docket: 0801 01802 Registry: Calgary Between: Michael Clancy and Catherine Clancy Plaintiffs - and - Mary Gough, Paul Gough, Heather Gough, Steven Gough, Sean Gough, Carol Bancroft, Barry Pearse, Cheryl Young, Doug Christensen, Kevin Christensen, Alvin Malin, Gerry Malin, Julie Gough, Terry Zimmerman, Drew Devries, Darryl Lyczewski, Sherry Lyczewski, Roger Blackwood, Jerry Blake, Albert Johnson and Robert Airth Defendants And Between: Mary Gough, Paul Gough, Heather Gough, Steven Gough, Sean Gough, Carol Bancroft, Barry Pearse, Cheryl Young, Doug Christensen, Kevin Christensen, Alvin Malin, Gerry Malin, Julie Gough, Terry Zimmerman, Drew Devries, Darryl Lyczewski, Sherry Lyczewski, Roger Blackwood, Jerry Blake, and Robert Airth Plaintiffs by Counterclaim - and - Michael Clancy, Catherine Clancy, Interprovincial Lottery Corporation and Western Canada Lottery Corporation Defendants by Counterclaim

_______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.M. Bensler _______________________________________________________ I. Introduction [ 1 ] This costs application was made following the conclusion of a trial relating to the parties' legal rights in respect of a group lottery pool that won a jackpot worth $20M in 2007.

For the reasons that follow I award the Defendants in this matter party and party costs in the aggregate amount of $64,403.38, inclusive of GST. [ 2 ] In rendering this decision I have declined to award double costs in relation to a settlement offer made by the Defendants but not accepted by the Plaintiffs; I have declined to award second counsel fees to the Defendants; and I have adjusted certain disbursements to accord with my

interpretation of provisions within the Alberta Rules of Court , Alta. Reg. 124/2010, existing jurisprudence, and my view of what is reasonable and proper in the circumstances. Reasons for each determination are set out below. II. Facts [ 3 ] The trial of this matter was heard between September 20 and October 1, 2010. The issue at trial was whether the Plaintiffs were entitled to two shares of the lottery winnings. The thrust of the Plaintiffs argument was an agreement the Plaintiffs allege existed between them and other members within the lottery pool.

Pursuant to that purported agreement, every person in the pool undertook to ensure that no other member was left out of a lottery draw on account of not being personally present to make their monetary contribution. That is, if one or more persons were not present on the day money was being collected, then, according to the Plaintiffs, the agreement stipulated that those who were present would contribute on behalf of the absentees and later recoup that contribution.

The Plaintiffs also advanced several other arguments premised on breach of trust, unjust enrichment, and negligence - though breach of the alleged contract was the primary basis of the claim. [ 4 ] The matter was decided in favour of the Defendants. While I found the Plaintiffs had a genuine and subjective belief that such an agreement did exist, I concluded that other members of the group were not operating under the same belief as to the purported obligations.

The evidence was that other participants, and in particular the members of a ‘core group’, did not ensure that every person was included in the lottery pool every week: Clancy v. Gough , 2011 ABQB 439 at para. 55 . [ 5 ] In terms of the Plaintiffs other arguments I held: (

i) The parties lacked "certainty of intention" in order to create a trust: Clancy at para. 75 ; (ii) The parties did not hold a common intention that would otherwise result in a trust (assuming the common intention doctrine survives in this type of circumstance following the Supreme Court of Canada's recent decision in Kerr v. Baranow , 2011 SCC 10 ): Clancy at para. 83 ;

(iii) No one contributed or agreed to contribute on behalf of the Plaintiffs in respect of the November 23, 2007 Super 7 draw: Clancy at paras. 76-77 ; (iv) There was no unjust enrichment because part of the Plaintiffs' monetary contribution at issue was to reimburse Mr. Christensen for his past contribution on the Plaintiffs' behalf: Clancy at para.79; and (

v) Based on the Court's ruling that there was no agreement binding the parties, a claim based on negligence could not succeed: Clancy at para. 86 . [ 6 ] On March 24, 2009, prior to trial, the Defendants with the exception of Albert Johnson (collectively referred to as the Offering Parties) offered to settle the matter with the Plaintiffs on the following terms. 1. The Offering Parties will pay to the Clancy's the all inclusive sum of $100.00, inclusive of all costs and interest, in full and final settlement of all of the Plaintiffs' claims against all of the Defendants; 2.

The claim of the Plaintiffs against the Defendant, Albert Johnson, shall be allowed to be continued with but shall be limited to the sole liability of Albert Johnson to the Plaintiffs and the Plaintiffs shall abandon, release and discontinue any joint claim against Albert Johnson in relation to any possible joint liability of the Offering Parties arising from any fault or liability of Albert Johnson; 3.

The Plaintiffs will abandon any claim to 20/21 of the portion of the trust funds now held by Fraser Milner Casgrain LLP to the credit of this action and will forthwith irrevocably authorize Fraser Milner Casgrain LLP to release to each of the Offering Parties an equal share of a 20/21 share of the trust funds and all accrued interest now held by Fraser Milner Casgrain LLP in their trust account which trust funds represents 2/23rds of the Super 7 lottery prize, plus all accrued interest thereon; 4.

The balance of the 1/21 share of the trust funds now held by Fraser Milner Casgrain LLP shall continue to be held by Fraser Milner Casgrain LLP in their trust account for the credit of either the Clancys or Albert Johnson pending further directions of the Court; 5. The Offering Parties will discontinue the Counterclaim against all of the Defendants by Counterclaim, and the Clancys shall waive any claim for costs of the Counterclaim; and 6.

The Plaintiffs will discontinue without costs the main action and the Offering Parties will waive any claim for costs in the action brought by the Plaintiffs. [ 7 ] The settlement offer also contained a provision that if the offer was not accepted within 45 days of the date of service the offer may be withdrawn. The Plaintiffs did not accept these terms of settlement and on May 11, 2009 the Offering Parties withdrew their offer. [ 8 ] Following the trial judgment the parties were unable to agree on costs, which has resulted in this application.

In the Bill of Costs submitted to the Court the Defendants seek to recover double costs in relation to those steps in the litigation taken after the settlement offer was withdrawn, second counsel fees in respect of Ms. Bazant's involvement, and various other fees and disbursements. III. Issues [ 9 ] Following are the issues before the Court with respect to this application.

A. Was the Defendants' settlement offer genuine? B. Are second counsel fees warranted in the circumstances? C. Are the claims for certain disbursements reasonable and proper? IV. Analysis A. Was the Defendants' settlement offer genuine [10] The Defendants rely generally on rule 4.29 of the Rules of Court as the basis for claiming double costs, and in particular onrule 4.29(3) (the equivalent substantive rule being R. 174 under

Part 12 of the former Rules of Court). The most relevant parts of R. 4.29pertaining to the matters at issue are set out below: 4.29 Costs consequences of formal offer to settle ... 4.29(2) Subject to subrule (4), if a defendant makes a formal offer to settle that is not accepted and a judgment or order in the action ismade that is equal to or more favourable to the defendant than the offer, the defendant is entitled to costs for all steps taken in the actionin relation to the action or claim after service of the offer. 4.29(3) A defendant is entitled to double the costs provided for in subrule (2), excluding disbursements, if (

a) subrule (2) applies, and (

b) the action or claim that is the subject of the formal offer to settle is dismissed. 4.29(4) This rule does not apply ... (

d) in the case of a formal offer to settle that is withdrawn in accordance with rule 4.24(4), or (

e) if in special circumstances the Court orders that this rule is not to apply. [11] In argument the Defendants advanced the position that double costs are not discretionary. The Defendants support thisproposition by referring to the mandatory language used in the predecessor rule R. 174 (1.1), which stated "... those costs shall, unlessfor special reason, be double the amount of costs (excluding disbursements) the defendant would otherwise have recovered ..." [emphasisadded]. The Defendants further support this position by citing authorities such as Rahmath v.

Louisiana Land & Exploration Co. (1989),1989 ABCA 323 , 104 A.R. 391 (C.A.) and Whittle v. Davies (1987), 1987 ABCA 236 , 104 A.R. 336 (C.A.). Rule4.29(3) also uses strong language that a defendant "is entitled to double costs" where certain conditions are met.

[ 12 ] However, the operation of the rule on double costs is only triggered following a threshold inquiry where a Court determines the settlement offer was, in fact, genuine: Marathon Canada Ltd. v. Enron Canada Corp. , 2008 ABQB 770 at para. 43 . The genuine nature of a settlement offer was canvassed by the Alberta Court of Appeal in Allen v. University Hospitals Board , 2006 ABCA 101 , 384 A.R. 23 at paras. 13-17 : 3. Must Be a Genuine Offer 13.

For a settlement offer to satisfy the purpose of the compromise rules and justify a double costs sanction, it must have been a genuine offer at the time it was served and remained open for acceptance: Petro-Canada Products Inc. v. Dresser-Rand Canada Inc. (2004), 33 Alta. L.R. (4th) 197, 2004 ABCA 282 (Alta. C.A.) . 14. In every case where double costs are claimed under

Part 12 on the basis of an unaccepted offer of settlement, the court must determine if the offer was genuine. As a general rule, for an offer of settlement to qualify as a genuine offer it must have been one that was reasonable and realistic in all the circumstances current at the time it was served and remained open. ... 15. To be genuine, an offer of settlement made pursuant to

Part 12 must include an element of compromise: Blue Range Resource Corp., Re (2001), 281 A.R. 351, 2001 ABCA 177 (Alta. C.A.) at para. 1 . 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 , supra. 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 Resource Corp. , supra at paras. 11 and 13.

The addition of an offer to forego costs that may be incurred after service of the offer does not introduce an element of compromise. 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. 16. 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 (2001), 293 A.R. 384, 2001 ABCA 152 (Alta. C.A.) . Such an offer is merely a no-risk litigation strategy or tactic.

If such an offer were held to justify a double costs penalty if not accepted, a litigant with a bona fide perception of the facts or the law, or both, different than that of his adversary could only pursue the matter to trial or appeal at an unjustifiable financial risk, thus potentially impeding the access of deserving litigants to the courts and aggravating the inherent advantage enjoyed by litigants with the deepest pockets. 17. 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. [ 13 ] In Allen a majority in the Court of Appeal declined to award double costs based on a determination that the offer to forgo five percent of the amount recovered at trial did not reflect the relative strength of the parties' positions at the time the offer was made and remained open: Allen , at para. 19 .

The Court held that the grounds of appeal were seriously arguable, the outcome was unpredictable, and the issues complex as evidenced by the length of time dedicated to oral argument and the long duration before a final judgment was rendered: Allen , at para. 18 . [ 14 ] In the instant case, as in Allen , I do not find the Defendants' offer was genuine because it lacked an element of compromise that reflected the relative strength of the parties' positions at the time the offer was served and remained open.

The primary issue at trial – whether there was an agreement between the parties to ensure every person was entered into every draw – was largely a fact-based determination that could not have been predicted in advance. The outcome was entirely dependent on what evidence came out at trial, the

credibility of witnesses presenting that evidence, and how the trial judge perceived the evidence including any explanations given for evidentiary gaps, contradictions, or other weaknesses. A largely fact-driven case can go either way and is often unpredictable. [ 15 ] For example, had the purported agreement been found to exist, or had it been found as a fact that Mr. Christensen received money from the Clancys specifically intended for the November 23rd Super 7 draw, the Plaintiffs argument might have succeeded on several grounds.

In my opinion, prior to trial the Plaintiffs had a facially meritorious claim and triable issue. However, the terms of the Defendants' settlement offer failed to acknowledge the relative strength of the Plaintiff's position. [ 16 ] In these circumstances was it reasonable and realistic for the Defendants to expect the Plaintiffs to abandon their claim for more than $1.7M in exchange for $100, a waiver of costs up to that point, and the discontinuance of the counterclaim? In my opinion the answer is no.

Counsel for the Defendants argued strenuously that he obtained significant admissions from the Plaintiffs during discoveries that informed his belief that the offer was genuine. However, as stated by the Alberta Court of Appeal in Allen at para. 17 , "assessment of whether an offer was or was not genuine requires an examination of all of the surrounding circumstances, subjective and objective ..." [emphasis added]. [ 17 ] In my opinion, viewed objectively, any belief that the terms of the offer would motivate the Plaintiffs to settle was unreasonably held.

While I remain mindful that courts should resist drawing bright lines with respect to monetary sufficiency underlying what is, versus what is not, a genuine element of compromise, I note the insignificant value of the offer relative to the relief claimed. The Plaintiffs sought a 2/23rds interest in the lottery winnings, an allocation they sincerely believed they were entitled to. Nothing more, nothing less.

By way of comparison, $100 to forgo the Plaintiffs' claim represents 0.005% of the judgment the Clancys were seeking. [ 18 ] In oral submissions counsel for the Defendants rightfully argued that waiving costs can amount to valuable consideration in a settlement offer. I agree. The jurisprudence is clear on this point: Meyer v. Partec Lavalin Inc. , 2002 ABCA 114 , 303 A.R. 385. However, I also note that costs follow the event.

If the Defendants were willing to pay an amount to the Plaintiffs in satisfaction of the claim, then from a practical standpoint that outcome emulates a trial judgment in favour of the Plaintiffs. In that case any forthcoming costs award would also have favoured the Plaintiffs: Budget Rent-A-Car of Edmonton Ltd. v. Security National Insurance Co. , 2001 ABCA 71 , 277 A.R. 305 at para. 10 .

On this reading of Budget , it seems more of the benefit of mutually waiving costs would actually accrue to the Defendants rather than to the Plaintiffs, pursuant to clause 6 of the settlement offer. [ 19 ] Even if I am wrong, waiving the Defendants costs in these circumstances does not change my conclusion regarding the genuineness of the offer. In oral argument counsel estimated that the value of the Defendants' costs up to the time the offer was made was approximately $18,000 - $20,000.

Comparing these figures, including the $100 proposed payment, discloses the uppermost value of the offer in relation to the relief claimed was little more than 1%. In my opinion this did not fairly represent the relative strength of the parties' positions at the time the offer was made and remained open.

Given the factual nature of the decision, and for the reasons set out above, it was not 99% likely that the Defendants were bound to win at any point prior to trial. [ 20 ] I specifically decline to compare the value of the settlement offer to the final judgment at trial because this case was an all or nothing proposition. The Plaintiffs were either going have their alleged entitlement to two shares of the lottery winnings affirmed, or they were not.

There was no middle ground open to the Court, so I do not find a relative assessment in this regard appropriate since the judgment in an all or nothing trial is an erroneous standard from a comparative perspective. [ 21 ] Some cases have also held that one party's willingness to forgo a cross-action can be valuable consideration that forms the basis for a genuine element of compromise: Strandquist v. Coneco Equipment , 2000 ABCA 138 .

While that is true, this case does not attract the application of that principle because the Defendants' counterclaim lacked substance, thereby undermining any ostensible value in proposing to discontinue it. My conclusion on the merits of the counterclaim is supported by the Defendants' own conduct in terms of failing to adduce any evidence or advance any argument to make out their case: Clancy at para. 90 .

As a result, the proposal to forgo the counterclaim does not impact the outcome of my analysis. [ 22 ] On this basis I conclude that the Defendants' settlement offer did not contain a genuine element of compromise. The terms of the offer were not aimed at furthering the goals underlying the compromise rules set out in Division 5 - Settlement Using Court Process (previously

Part 12 - Compromise Using Court Process, and in particular rule 174). To the contrary, in my view the practical purpose of the Defendant's offer was to trigger the double costs sanction in the event the Plaintiffs' claim was dismissed.

[23] I also find the public policy stated by the Court of Appeal in Allen, at para. 16, is particularly relevant and compelling in theinstant case. [If an offer lacking a genuine element of compromise was held to trigger a double costs sanction] a litigant with a bona fide perception ofthe facts or the law, or both, different than that of his adversary could only pursue the matter to trial or appeal at an unjustifiable financialrisk, thus potentially impeding the access of deserving litigants to the courts and aggravating the inherent advantage enjoyed by litigantswith the deepest pockets. [24] At trial I found the Plaintiffs held a sincere belief that they had an agreement with other members of the group lottery pool toensure participants covered the contributions of one another when individuals were not available to make their own payment.

I have alsofound the Defendants' offer could not reasonably be expected to motivate the Plaintiffs to settle. Furthermore, based on having alreadyreceived 21/23rds of the lottery winnings, it seems likely that the Defendants were in a much stronger financial position to litigatecompared to the Plaintiffs. [25] This situation is precisely the scenario contemplated by the Court of Appeal. Allowing double costs in this circumstancewould have a chilling effect on similarly situated litigants and aggravate the already formidable economic barriers that impede access tojustice.

Therefore, even if I am wrong with respect to the genuineness of the offer, on the facts of this case I find the negative impact onthe accessibility of the courts to potential litigants qualifies as a special circumstance that favours exercising my discretion to order thedouble costs rule not apply, pursuant to R. 4.29(4)(e). [26] Last, the clear and plain meaning of R. 4.29(4)(

d) indicates that double costs are not available in circumstances where, likehere, the offer to settle was withdrawn. Even though the substantive issue at trial was resolved prior to the new rules coming into force,this costs application is subject to the new rules pursuant to R. 15.2 in the transitional provisions included in

Part 15 of the new Rules ofCourt. B. Are second counsel fees warranted in the circumstances [27] As a general proposition courts should be reluctant to award costs for second counsel in the absence of an established needbased on the complexity of issues or law: Alberta Mortgage & Housing Corp. v. Strathmore Investments Ltd. (1995), 1995 ABCA 266, 169 A.R. 286 at para. 2 (C.A.), Watts v. Wakerich, 2001 ABCA 207 at para. 2. [28] The Defendants seek costs related to second counsel fees and refer to Alberta Productions Corp. v. Canada Lands Co.

CLCLtd., 2004 ABCA 25, 346 A.R. 180 at para. 2 for a series of factors relevant to the determination of whether such an award should begranted. I agree this case sets out the applicable law. The factors referred to are summarized below: (

i) The general importance of the issue or issues to the parties or to others. (ii) The value of the case. (iii) The complexity and scope of the issues. (iv) The size of the trial record. (

v) The manner in which opposing counsel conducts the case. (vi) Whether second counsel addressed the court [citations omitted]. (

i) The general importance of the issue or issues to the parties or to others [29] The Defendants argued that the issues in this case were very important to the parties. I agree that determining entitlement totwo shares of the lottery winnings was a matter of great importance to the Plaintiffs. The monetary value of those shares was in excess of$1.7M. I think it is fair to say that for most people this is a life altering amount of money.

[ 30 ] On the other hand, the issue was not nearly as important to the Defendants who were already entitled to a life altering share of twenty million dollars, irrespective of the outcome at trial. To each Defendant the trial decision meant the difference between $869,565 and $952,380 (setting aside interest). While $82,815 is still a substantial amount of money, relative to the money the Defendants had already won and were in possession of, the stakes at trial were less significant for each of them.

I also find it relevant that the source of funds in this case was a windfall based solely on good fortune, rather than income that the Defendants had worked hard to earn. (ii) The value of the case [ 31 ] As noted, the monetary value of this case was slightly in excess of $1.7M. (iii) The complexity and scope of the issues [ 32 ] In my view the complexity and scope of the issues was low.

The Plaintiffs' arguments all centered on whether or not they could prove the existence of an agreement between the members of the lottery pool, or whether the Clancys had, in fact, paid money that was intended to be entered into the Super 7 draw.

The Court's findings of fact on these two questions were dispositive of the central argument based on breach of contract, and informed the conclusions with respect to breach of trust, unjust enrichment, and negligence. [ 33 ] For example, based on finding there was no agreement, and therefore no obligations between the parties, there was no foundation upon which to find the Defendants owed the Plaintiffs a duty of care. Similarly, finding as fact that part of the $20 paid to Mr.

Christensen was to reimburse him for contributing on the Clancys' behalf in respect of an earlier draw was dispositive of the unjust enrichment claim. These same findings helped determine whether or not the parties had an intention to create a trust. [ 34 ] On the whole, the issues before the Court were resolved in a relatively simple and straightforward manner once the evidentiary record was complete.

While there were many witnesses that gave evidence, this was not indicative of issue complexity, but rather a product of the number of people involved the group lottery pool. (iv) The size of the trial record [ 35 ] The number of witnesses and duration of the trial created a moderate trial record. (

v) The manner in which opposing counsel conducts the case [ 36 ] There is nothing about the manner in which the Plaintiffs' counsel conducted its case that favours an award of costs in respect of second counsel. As noted, the case was not particularly complex, and the Plaintiffs' counsel did not undertake a course of legal maneuvering that appreciably increased the complexity or volume of issues before the Court. Whether second counsel addressed the court [ 37 ] Ms. Bazant did not address the Court at any point during the course of the trial. However, counsel for the Defendants argued that Ms.

Bazant was heavily involved in preparing witnesses in advance of those witnesses giving evidence, and note her presence in the courtroom during trial taking notes of events as they transpired. [ 38 ] On balance, and in consideration of the factors above, this is not a case where second counsel fees are warranted. The issues were narrow, straightforward, and determined largely based on several key findings of fact. The Court of Appeal's statement in Viridian Inc. v.

Dresser Canada , 1998 ABCA 275 at para. 8 is applicable, "while second counsel may have been something which a cautious client might wish to have (a matter in which I express no opinion), the other side should not be forced to pay for second counsel here".

Other considerations [39] The Defendants also put forward a recent decision from this Court in Chapell v. Canadian Pacific Railway, 2011 ABQB 74, 42 Alta. L.R. (5th) 120 at paras. 29-31, for a series of propositions. 29. Although the complexity of the issues and the general importance of the issues are important factors, the litigation need not be eithercomplex or weighty for second counsel fees to be awarded: Kassam v. Dragish (1991), (AB KB), 123 A.R. 161(Alta. Q.B.) at para. 13. However, in Alberta, monetary value of the case is a weighty factor: Kassam at para. 13.

While second counselneed not be present at every court appearance, such counsel must assist in the preparation leading up to presentation of the matter andsuch involvement must be justified by the nature of the case: Davidson v. Patten, 2005 ABQB 521, 381 A.R. 6 (Alta. Q.B.), var'd onother grounds 2008 ABCA 65 (Alta. C.A.) at para. 19. 30. The amount claimed in second counsel fees is also a pertinent factor: Kassam at para. 17.

In Kassam, at para. 14 Veit J. alsosuggested that courts should err, if at all, on the side of generosity by allowing second counsel fees since party and party costs provide acheck and balance by reimbursing only a fraction of the cost of second counsel at trial. 31. The Alberta Court of Appeal also came to a similar conclusion, that is, in a case of real doubt, erring on the side of the party whichretained the second counsel: Viridian Inc. v. Dresser Canada Inc., 1998 ABCA 275 (Alta.

C.A.) at para. 4. [40] In my view, none of the legal propositions contained in these paragraphs alter my conclusion with respect to second counselfees. First, while it might be the case that litigation need not be either complex or weighty in order to grant this award, this statementimplies that in the absence of complexity there should be other grounds to justify the involvement of second counsel. I am not persuadedon these facts that other grounds exist.

As a result, there is no reasonable basis to overcome the Court of Appeal's reluctance to awardcosts for second counsel in the absence of established complexity. [41] Second, the basic proposition that Chapell takes from Davidson is that the involvement of second counsel must be justified bythe nature of the case.

As articulated above, I am not of the opinion that the nature of this case was so complex, or the number of issuesso voluminous, or the trial so intricate and difficult to manage that the involvement of second counsel rose above the desire for cautionand into the realm of necessity. [42] Third, I also fail to see the applicability to this case of the proposition in Chapell at para. 30 citing Kassam at para. 14 that"courts should err, if at all, on the side of generosity by allowing second counsel fees since party and party costs provide a check andbalance by reimbursing only a fraction of the cost of second counsel at trial".

As determined above, second counsel was not warranted, atleast not from the perspective of recovering those costs from the other side. Thus if second counsel fees are not being granted at all,quantum is an irrelevant consideration. [43] In the alternative, viewing this proposition not from the perspective of quantum, but as stating that courts should err in favourof awarding second counsel fees versus not, the logic does not stand up to scrutiny.

In situations where, like here, the Court does not finda sufficient basis to grant second counsel fees, it is faulty reasoning to argue that these costs become warranted on account of only partialrecovery inherent in the applicable

Schedule C tariffs. In other words, the mere partial recovery of costs cannot ground a basis for anaward where a basis does not otherwise exist. [44] Fourth, the Defendants also refer to a statement from the Alberta Court of Appeal in Viridian at para. 4 that "the Court, in acase of real doubt, should err on the side of the party which in fact retained second counsel". In the instant case I hold no doubt thatsecond counsel is not justified as a recoverable cost. As a result, the precondition of uncertainty in the Court of Appeal's statement is notmet so that principle does not apply to these circumstances. C. Are the claims for certain disbursements reasonable and proper

[ 45 ] The Plaintiffs do not dispute the disbursements included on the Bill of Costs. However, I choose to exercise my discretion to adjust certain disbursements in the interests of ensuring those costs are reasonable and proper. Following are the applicable rules that set out the discretion of the Court to award costs: Court-ordered costs award 10.31(1) After considering the matters described in rule 10.33, the Court may order one party to pay to another party, as a costs award, one or a combination of the following: (

a) the reasonable and proper costs that a party incurred to file an application, to take proceedings or to carry on an action, or that a party incurred to participate in an application, proceeding or action, or ... Court considerations in making costs award 10.33(1) In making a costs award, the Court may consider all or any of the following: ... (

g) any other matter related to the question of reasonable and proper costs that the Court considers appropriate. [ 46 ] In assessing the claimed disbursements I remain mindful of what is already included within the tariffs provided in

Schedule C: What the items in the tariff include 2(1) The description of items in Division 2 includes, with respect to each item: (

a) instructions from a client; (

b) all preparatory work related to the commencement of an action and preparatory work related to an item and the preparation of all records and material; (

c) the drafting, issuing and service of any required commencement document, pleading, affidavit and related documents; (

d) attendances; (

e) correspondence; (

f) all material read or written;

(

g) if an application is abandoned, all work done in connection with the abandonment; (

h) other activity undertaken or implied in the item, including necessary or convenient services. [47] Furthermore, in H. (V.A.) v. Lynch, 2001 ABCA 37, 277 A.R. 104 at para. 22, the Alberta Court of Appeal took the positionthat a true disbursement refers to a cost paid to a third party on behalf of a client. 22. The word "disbursement" is derived from "disburse" which means to expend money. One would expect evidence that money waspaid to a third party in order to qualify as a disbursement. [48] With the applicable rules set out I now turn to various disbursement line items from the Bill of Costs that I disallow as notreasonable and proper in the circumstances. (

i) Computer research billed at $883.85 (ii) Fax charges billed at $425.00 (iii) Laser printing billed at $2,210.80 (iv) Photocopy charges billed at $2,100.60 [49] I will address items (

i) and (ii) together, and items (iii) and (iv) together. Computer Research & Fax Charges [50] I disallow the claim for computer research and fax charges on the basis that these costs are already reflected in the tariffs forrecoverable fees, pursuant to s. 2(1)(

h) of Division 1 within

Schedule C, "other activity undertaken or implied in the item, includingnecessary or convenient services". It is obvious that any legal research undertaken in the course of defending this action, computer-basedor otherwise, was to support the various steps in the litigation process. Therefore, research costs are only recoverable as a constituentelement of the tariffs provided in

Schedule C, which have already been claimed on the Bill of Costs. [51] Similarly, it is necessary for counsel to communicate with one another, and their clients, over the life of a legal matter.Facsimiles simply facilitate more timely distribution of written documents rather than traditional letter mail.

Moreover, given howcommonplace fax machines are in law offices and the nature of its function, it is difficult to consider the cost of ownership and operationas anything but overhead. [52] I find both computer research and fax charges fall squarely within the language of "implied activity" and "necessary services".It is not reasonable to consider computer research or the use of fax machines independently from activity already compensated for withinthe

Schedule C tariffs. I also take note of the considerable judicial authority for disallowing computer research as a recoverabledisbursement: Strandquist v. Coneco Equipment, 2000 ABCA 138 at para. 7; Marathon Canada Ltd. v. Enron Canada Corp., 2008ABQB 770, 447 A.R. 89 at para. 53; Pauli v. ACE INA Insurance, 2003 ABQB 600, 336 A.R. 85 at para. 68; Reid v. Stein (1999), 1999ABQB 222 , 253 A.R. 90 at para. 56 (Q.B.); Sidorsky v. CFCN Communications Ltd. (1995), (AB KB), 167A.R. 181 at para. 11 (Q.B.).

While certain of the costs awarded in Sidorsky were overturned on appeal, the Trial Judge's decision withrespect to computer research was undisturbed. [53] Furthermore, neither computer research nor the cost of sending or receiving faxes are true disbursements as contemplated inLynch. In other words, these are not expenses that are truly paid to third parties. Rather, the costs of subscribing to legal databases andpurchasing and operating fax machines are overhead expenses necessary to run an effective legal practice in modern times.

Theseexpenses are similar in character to rent, office furniture, employee salaries, and telecommunication services that are recovered as part of

the legal fees charged to clients. If there are related expenses over and above the associated overhead cost in question, such as long distance phone calls, then those are recoverable amounts. As such, in the instant case I do not disturb the disbursement for long distance charges. Laser Printing and Photocopying [ 54 ] Laser printing and photocopying are interesting categories. Clearly having the ability to print and photocopy is a necessary capability to operate any law office, so the associated costs tend to fall within the characterization of overhead.

Moreover, given that many firms do actually produce most documents in-house (often using commercial quality printers and photocopiers) the cost associated with printing and photocopying is not a true disbursement paid to a third party. [ 55 ] On the other hand, the practice of law is still incredibly document intensive and paper-based, so in my view it is reasonable to allow some level of recovery for printing and photocopying directly related to a particular file. However, I do so cautiously.

It seems the rate that many law offices charge for these services is out of touch with the true internal cost, or the equivalent expense that would otherwise be incurred if these services were delivered by a third party commercial printer. [ 56 ] That premise seems to apply in this case where counsel for the Defendants informed the Court that its practice is to bill each black and white printed or copied page at 30¢ each, though no independent evidence was introduced in support. I take judicial notice that the commercial cost to the public for similar services is considerably less.

For example, at the various Staples Copy and Print Centres around Calgary the cost of printing and photocopying ranges from 3-10¢ per standard page, depending on the quantity of printing ordered. It is also worthy to note that those rates still result in profit to the commercial printer. [ 57 ] I find it unreasonable that the Defendants seek to recover from the Plaintiffs a "disbursement" at least three times higher than if the work had actually been performed by a third party.

In the words of Wittmann J.A. (as he then was) "one would expect evidence that money was paid to a third party in order to qualify as a disbursement." While I am willing to allow some level of printing and photocopying, lacking evidence as to the true cost of these services to the law firm, I am not willing to entertain a submission for an expense so out of alignment with commercial reality.

If law firms are actually incurring 30¢ to produce every printed or photocopied page then lawyers should be prepared to submit evidence related thereto when attempting to recover these costs from their clients, or the other party. [ 58 ] Using the rate provided by counsel and the aggregate charges for these line items on the Bill of Costs, the number of underlying pages can be mathematically calculated. In this manner I have determined the volume of laser printed and photocopied pages was 7369 and 7002, respectively.

However, the cost reproducing drafts, or the cost of copying documents such as pleadings, motions and affidavits compensated under another item in the costs schedule, is not recoverable: Millott Estate v. Reinhard , 2002 ABQB 998 , 322 A.R. 307 at paras. 72-74 . In oral argument counsel for the Defendants estimated that approximately 10% of the total pages produced was used to create ‘final' documents. As such, I allow 10% of 7369 for laser printing and 10% of 7002 pages for photocopying. [ 59 ] Referring back to the publicly available Staples price list, this quantity of standard printing would cost 6¢ per page.

While I don't impose the same efficiencies on a law firm as might be incumbent on a commercial printer, I find 10¢ per page to be reasonable in the circumstances. Reducing the rate for printing and photocopying also finds judicial support both in this Court as well as the Alberta Court of Appeal: Lynch at para. 48 , Dechant v. Law Society of Alberta , 2001 ABCA 81 , 277 A.R. 333 at para. 30 , and Marathon Canada Ltd. at para. 53 . V. Conclusion [ 60 ] The following

summary describes the impact of this decision on the Bill of Costs as originally submitted. Original Fees: $113,450.00

Less Double Costs: ($47,475.00) Less 2nd Counsel Fees: ($8,125.00) Allowable Fees: $57,850.00 Original Disbursements: $8,963.09 Less Computer Research: ($883.85) Less Fax Charges: ($425.00) Less Laser Printing: ($2,210.80) Less Photocopy Charges: ($2,100.60) Plus Allowable Laser Printing: $73.69 Plus Allowable Photocopy Charges: $70.02 Allowable Disbursements $3,486.55

Summary: Allowable Fees $57,850.00 Allowable Disbursements $3,486.55 Subtotal $61,336.55 Plus G.S.T. at 5% $3,066.83 Total Allowable Costs $64,403.38 [ 61 ] Given that all substantive issues in this costs application were decided against the Defendants, the Plaintiffs will have their costs in relation to this proceeding per Column 5 on

Schedule C. That amount is to be set off against the aggregate award stipulated above. Heard on the 17 th day of August, 2011 and the 26 th day of September, 2011. Dated at the City of Calgary, Alberta this 14 th day of December, 2011.

S.M. Bensler J.C.Q.B.A. Appearances: Brian N. Clark, Clark & Associates for the Plaintiffs D. Brian Foster, Q.C. and Natasha E.A. Bazant, Fraser Milner Casgrain LLP for the Defendants