HSBC Bank Canada v., 2012 ABQB 27

Court of Queen ’ s Bench of Alberta Citation: HSBC Bank Canada v. 1100336 Alberta Ltd. (Incredible Electronics Wholesale), 2012 ABQB 27 Date: 20120112 Docket: 0403 19158 Registry: Edmonton Between: HSBC Bank Canada Plaintiff - and - 1100336 Alberta Ltd. carrying on business as Incredible Electronics Wholesale; Electronics Wholesale (Edmonton) Ltd., Incredible Electronics Inc., Ariza Technology Inc., HBC Business Credit Inc., David Fuss, Cameron Kendrick and Rhonda Thuna Defendants _______________________________________________________ Memorandum of Decision re Costs of the Honourable Mr. Justice E.A.

Marshall _______________________________________________________ [ 1 ] On December 1, 2011, I delivered judgment against the Defendants in the amount of $1,762,902.14. I concluded that the Defendants engaged in a civil conspiracy to defeat a debt owed by 828326 Alberta Ltd. (“828”) to HSBC Bank Canada (“the Bank” or

“HSBC”). [2] Counsel have each provided me with written submissions respecting costs. As was the case with much of the litigation, theparties have widely separated views of the appropriate costs award.

Basically the Plaintiff seeks full indemnity costs while theDefendants Fuss and Thuna submit there should be no costs payable by them; alternatively, if costs are payable by the Defendants theyshould be imposed eighty per cent against the Defendant Cameron Kendrick and twenty per cent against them. [3] I have a broad authority and discretion to order a litigation party pay costs to other parties: Alberta Rules Of Court, Alta Reg124/2010 [the “Rules”, or individually a “Rule”]. Rule 10.33 identifies a range of considerations that may be relevant to an award ofcosts.

Particularly relevant are: 1. the result of the action and the degree of success of each party: Rule, 11.33(1)(a); 2. the amount claimed and the amount recovered: Rule, 11.33(1)(b); 3. the complexity of the action: Rule, 11.33(1)(d); and 4. the apportionment of liability: Rule, 11.33(1)(e). [4] The Bank submits full indemnity costs should be awarded as the Defendants, as part of their conspiracy: 1. misappropriated assets comprising the Bank’s security, 2. diverted the assets for their own uses, 3. breached and disregarded:

a) the trust relationship between 828 and the Bank, and

b) their fiduciary duties between 828 and the Bank, 4. and incorporated sham corporations to disguise their own involvement. [5] The Bank also submits that because fraud, breach of trust and fiduciary duties were perpetrated by the Defendants, the usualprinciple that elevated costs are appropriate only where the misconduct arose during the litigation, should not apply. Jackson v. TrimacIndustries Ltd. (1993), (AB KB), 138 A.R. 161, 8 Alta. L.R. (3d) 403 (Alta. Q.B.), varied in part (1994), 1994 ABCA199 , 155 A.R. 42, 20 Alta. L.R. (3d) 117 (Alta. C.A.) is cited.

[ 6 ] The relevance of Jackson v. Trimac Industries Ltd. is questionable at present. Polar Ice Express Inc. v. Artic Glacier Inc. , 2009 ABCA 20 at para. 21 , 446 A.R. 295 indicates that pre-trial misconduct is not a basis for full-indemnity costs. That has closed certain bases for solicitor-client and solicitor and own client cost awards : College of Physicians and Surgeons of the Province of Alberta v. J.H. , 2009 ABQB 48 at para. 18 , 468 A.R. 101 , see also Brown v. Silvera , 2010 ABQB 224 at paras. 26-71 , 488 A.R. 22 ; Evans v.

Sports Corp ., 2011 ABQB 616 at paras. 11-19 . [ 7 ] That said, the Court of Appeal in Polar Ice Express Inc. v. Artic Glacier Inc. comments on but does not decide whether solicitor-client or indemnity costs may be appropriate where pre-trial misconduct involves fidicuaries or trusts: 22 Trusts or a fiduciary relationship might be an exception, but that is irrelevant here. [ 8 ] Marceau J. concluded full indemnity solicitor and own client costs were appropriate in Chrystian v. Topilko , 2010 ABQB 456 , 498 A.R. 206 for pre-trial misconduct.

That case involved forged wills and supporting documents which were “... extreme conduct, certainly as extreme in civil law as it can be before other authorities of the state take interest.” (para. 58). The plaintiff “... was complicit in the attempt to perpetrate a fraud upon the court and upon her relatives to benefit her family ...” (para. 59). I do not believe the misconduct of the Defendants reaches that standard. [ 9 ] The Defendants Fuss and Thuna respond firstly by pointing to the findings of impropriety I found against the Bank’s representative, Selley.

It is also noted that I drew a clear line between the culpability of Kendrick on the one hand and Fuss and Thuna on the other. Certainly I agree that on this latter point. For example, they are correct there was no evidence Fuss and Thuna were aware of the impropriety of Kendrick in overstating the value of inventory of 828 and delaying the appointment of a receiver.

With respect to the former point, the matter of the impropriety of Selley cannot be relevant to the consideration of a costs award against the Defendants, the unsuccessful parties. [ 10 ] Fuss and Thuna extend the argument regarding the relative degrees of responsibility of the Defendants to argue that it would not be fair and reasonable in the circumstances to award costs against them which are equal to those awarded against Kendrick. No authority is cited for this proposition.

I believe it is contrary to the principle of tortious responsibility which is assigned to each party under the law of civil conspiracy. [ 11 ] The law does not provide for the division of liability among the parties according to their respective contributions to the conspiracy. Each conspirator is liable for the full loss. These two Defendants had several mechanisms to separate and segregate their risk from that of Kendrick, including coming to an independent settlement with the Plaintiffs or by advancing a separate contribution or indemnity claim against co-Defendant Kendrick.

Fuss and Thuna took no such step. [ 12 ] Nevertheless, there appears to me to be some merit to the argument that Fuss and Thuna should not bear the same weight of costs that might be borne by Kendrick for his egregious conduct, if he were the lone Defendant in the suit, for example. I prefer to make an equal costs award against each Defendant and lessen it to make it closer to that which would properly be visited upon Fuss and Thuna. [ 13 ] I do not find the Defendants hindered and delayed the litigation after it was commenced.

The delays caused by Kendrick prior to commencement of the suit do not result in an increase in costs here. Nor am satisfied that increased costs should result from Kendrick concealing and destroying evidence. It was not evident to me that Bank’s case would have been significantly advanced if documents had been produced. [ 14 ] The Bank submits that deterrence to others should be a factor to consider in imposing costs. The only authority cited is from the criminal law.

I am not satisfied deterrence has a role in civil litigation, outside of promoting timely and efficient prosecution of civil litigation: Rules , 1.2, 10.33(2).

[ 15 ] The evidence did not satisfy me that Fuss and Thuna were aware of Kendrick’s fraud. All three Defendants were in breach of fiduciary duties. [ 16 ] The Bank claims the Counterclaim by the Defendants Fuss and Thuna was frivolous and vexatious and part of steps to delay, deceive and defeat justice. I would not characterize the Counterclaim as such. I have seen more spurious ones come before the Court. [ 17 ] In

summary, the fraud committed by Kendrick cannot be imputed to Fuss and Thuna. There is no basis for finding misconduct by the Defendants during the course of the litigation so the Bank should not receive costs on an indemnity basis. While a trust and fiduciary status were involved in this case, I do not believe the pre-trial breaches of trust and fiduciary relationship are a kind that warrants solicitor-client costs. [ 18 ] A factor that merits consideration is the relative difficulty of establishing civil conspiracy. It is a comparatively rare creature in civil litigation and presents an extraordinary challenge to counsel. It justifies some increase in the usual scale of costs. Column 5 of

Schedule C provides for costs on matters of $1.5 million or more. [ 19 ] In all the circumstances the Bank shall have costs against Kendrick, Fuss and Thuna on Column 5, doubled. [ 20 ] There will be a fee of $1000 for the Costs Submission of the Bank’s Counsel. By written submissions received December 12 th , 2011 and January 5 th , 2012. Dated at the City of Edmonton, Alberta this 12 th day of January, 2012. E.A. Marshall J.C.Q.B.A. Parties: Gordon R. McKenzie, Nigel J. Forster, Patty Ko, Bishop & McKenzie LLP for the Plaintiff Milton A.

Davis, Kelli Preston, Davis Moldaver LLP for the Defendants David Fuss, Rhonda Thuma, Incredible Electronics Inc., Ariza Technology Inc. and HBC Business Credit Inc. Cameron Kendrick

on his own behalf