Indutech Canada Limited v Gibbs Pipe Distributors Ltd., 2012 ABQB 425

Court of Queen ’ s Bench of Alberta Citation: Indutech Canada Limited v Gibbs Pipe Distributors Ltd., 2012 ABQB 425 Date: 20120629 Docket: 0401 09099 Registry: Calgary Between: Indutech Canada Limited Plaintiff (Defendant by Counterclaim) - and - Gibbs Pipe Distributors Ltd., Barry Gibbs Sales Limited, 724192 Alberta Ltd., 974038 Alberta Ltd., Borealis Fabrication Ltd., Barry Gibbs, Guy Gibbs, ABC Corp., Cladtech Canada Inc., Barry Kossowan, Kossowan Holdings Inc. and 1036795 Alberta Ltd. Defendants - and - Gibbs Pipe Distributors Ltd. Plaintiff by Counterclaim _______________________________________________________ Reasons for Cost Decision of the Honourable Madam Justice B.E. Romaine

_______________________________________________________ Introduction [ 1 ] Indutech submits that it is entitled to enhanced costs, an increase in the amount that would normally be awarded for certain cost items under

Schedule C of the Rules of Court , because the amount calculated in accordance with

Schedule C is an unacceptable level of indemnity in this case. [ 2 ] The amount of costs calculated in accordance with

Schedule C would be $285,000, while actual legal fees are in excess of $950,000. Indutech seeks an increase in various cost items of approximately $225,000, or alternatively, a lump sum of $375,000 for specific items. [ 3 ] Specifically, Indutech submits that the complexity of the litigation and the conduct of the Gibbs Group Defendants justify a higher award of costs.

It does not pursue an enhanced costs claim against the defendants Barry Kossowan and Kossowan Holdings Inc., as it has reached a settlement with those defendants. [ 4 ] The Gibbs Group Defendants submit that, as a general principle, costs should approximate 40-50% of solicitor and own client costs: Marathon Canada Limited v. Enron Canada Corp. , 2008 ABQB 770 at para. 30 ; Trizec Equities Ltd. v. Ellis-Don Management Services Ltd. 1999 ABQB 801 ; LSI Logic Corp. v. Logani 2001 ABQB 968 . [ 5 ] Further, they submit that deviation from

Schedule C should only occur in exceptional circumstances, and the exercise of the Court’s discretion must be based on relevant and appropriate principles. Analysis [ 6 ] The Court has considerable discretion with respect to the amount and type of costs awarded pursuant to Rule 10.31(1). Rules 10.33(1) and (2) set out considerations the Court may take into account in making its award. The considerations most relevant to this case are: (

a) the result of the action and the degree of success of each party; (

b) the amount claimed and the amount recovered; (

c) the complexity of the action; and (

d) whether a party has engaged in misconduct. [ 7 ] The Court may also consider any other matter related to the question of reasonable and proper costs that it considers appropriate. [ 8 ] Courts have recognized that costs calculated in accordance with the normal guidelines of

Schedule C are sometimes inappropriate when applied to complex litigation: LSI Logic at para. 7.

[9] This was certainly complex litigation. The decision weighs in at 177 pages, and covers analysis of not only breaches ofcontract, but breach of fiduciary relationships and many of the economic torts. The litigation was intensively case-managed prior to trial,and took five weeks of trial time.

It involved many thousands of documents and approximately 40 days of examinations for discovery.The affidavit of the Chief Financial Officer of Indutech, filed in support of this application, sets out the scope and intensity of trialpreparation, and how it was that Indutech discovered the full extent of the breaches of contract and fiduciary duty through the course ofthe litigation, requiring thorough review of the extensive records produced by the defendants.

It was clear that Indutech had to recreatethe history of four years of business transactions, a massive undertaking. [10] Enhanced costs have also been awarded in cases where the defendants were found to have engaged in misconduct, includingfraud, breach of trust and breach of fiduciary duties, all of which were present in this case: Jackson v. Trimac Industries Ltd., A.J. No.218 ABQB at pg. 11; Pharand Ski Corp. v.

Alberta, (AB KB), 122 A.R. 395 QB. [11] The Gibbs Group Defendants submit that where a party has been punished for misconduct by an award of punitive damages,as was the case here, courts have been disinclined to punish that party further through a costs award: 539618 Ontario Ltd. v.Stathopoulos (1989), 17 A.C.W.S. (3d) 159 (Ont.H.C.J.) at para. 8. [12] It may be more accurate to say that an award of punitive damages may be a factor in considering enhanced costs, since therules and case authority in Alberta do not preclude the consideration of misconduct at the costs stage of proceedings, whether or notpunitive damages have been found to be appropriate.

Punitive damages reflect the misconduct of the Gibbs Group Defendants over thecourse of the Agency Agreement. An enhanced costs award reflects misconduct during the course of the litigation, and there is evidenceof such misconduct in the findings of credibility made with respect to various of the Gibbs Group Defendants. [13] Specifically, Indutech claims the following, some items of which are not contested: (

a) costs under Column 5 of

Schedule C with two times Column 5 for all steps taken after August 10, 2009. This item was notcontested. (

b) reimbursement of “all reasonable and proper disbursements”. This item was not contested. (

c) costs for “Commencement of Proceedings” in the amount of $20,000. Indutech submits that the pleadings in this matter were“anything but boilerplate”. The Gibbs Group Defendants disagree. Having worked through the pleadings, I must agree with Indutech.Since all cases are unique, it is of little assistance to compare pleadings with respect to other complex and protracted cases, as the GibbsGroup Defendants do in their submissions. The scope of the decision in this case speaks for itself. I allow costs for “Commencement of Proceedings” in the amount of $20,000. (

d) costs for “Disclosure of Records” in the amount of $10,000. This item was not contested. (

e) costs for “Review of Opposing Party Documents” in the amount of $20,000. As noted by Indutech, it was necessary tothoroughly review between 15,000 and 20,000 pages of documents produced by the Gibbs Group Defendants and to cross-reference themto Indutech records. The resulting damages spreadsheets proposed for trial were invaluable in saving additional trial time and confusion.I allow this item in the amount of $20,000. (

f) costs for “Questioning” either in a lump sum of $225,000 or alternatively, three times Column 5 of

Schedule C. I accept that preparation for examinations for discovery required an inordinate amount of time, both because of the nature of thelitigation and the many thousands of documents and because of the means the Gibbs Group of Defendants took to conceal the set-up of

Indutech and the lack of candour of their main witnesses. I therefore allow 2 ½ times column 5 of

Schedule C for this item, excluding Mr. Kossowan. (

g) costs for “Trial Preparation” in the amount of $50,000. Indutech submits that this enhancement is justified given that reviewing and finalizing the damages spreadsheets that were entered as exhibits at trial was a time-consuming process. I agree that these time-sheets were invaluable, and without them, the trial would have been required to be much longer. I allow ths claim for enhanced costs. (

h) a second counsel fee. This item was not contested. (

i) full counsels’ attendance costs for each half day of trial, without regard to the number of hours counsel were in attendance on any given trial day. The Gibbs Group Defendants submit that this is inconsistent with the convention normally followed by a taxing officer. Indutech submits that this convention is unrealistic, and unduly under-compensates counsel. I agree. The number of actual hours of trial time is unpredictable and often beyond the control of counsel, who must prepare for a full half day in any event. I allow this time as requested by Indutech. (

j) costs for “Written Argument” in the amount of $40,000. Indutech submits that the nature of the proceedings required extensive legal research, both with respect to liability and damages. I agree, and note that the briefs were thorough, updated the damages spreadsheets, and referenced emerging and complex economic torts. The Gibbs Group Defendants contrast the length of the written argument in Marathon , but each case is unique to its facts and issues. I allow this item of enhanced costs. (

k) expert fees for Mr. Copeland and Mr. Nelson. This item was not contested. (

l) costs for “Contested Applications”. This item was not contested. (

m) costs for “Case Management Conferences”. The Gibbs Group Defendants submit that these costs should be reduced because in Marathon , the Court reduced them to reflect the brief nature of some of the meetings. There is no evidence before me with respect to the length and nature of the case management meetings, and no reason to deny this item of costs or to discount it. (

n) full reimbursement of travel expenses incurred to attend at examinations for discovery in Edmonton in the amount of $6,297.56. Some of the examinations for discovery were directed by the case management justice to be conducted in Edmonton, even though this was a Calgary action, because of the volume of documents produced by the Gibbs Group Defendants and to allow the Defendants to continue to conduct their normal business. This is not a situation of a party retaining counsel outside of the judicial district of the case, and the benefit was to the Defendants. The costs are reasonable and allowed. I note they do not include the travel costs of Indutech’s Chief Financial Officer. (

o) post-judgment interest on taxable fees and disbursements from the date of the judgment. This item was not contested. (

p) costs of the special application for costs and the application for directions in the amount of $5,000. This is more than reasonable

given the briefing required and the nature of the arguments made, and I will allow it. [ 14 ] As I have allowed substantially all of the enhanced cost items claimed by Indutech, it is not necessary that I consider a lump sum of $375,000 in lieu of this relief. [ 15 ] The relief claimed may well take the costs award above the “normal” level of indemnity, but this was not a typical case, for the reasons already identified.

The factors of high complexity, the degree of success and the not-inconsiderable misconduct of the Gibbs Group Defendants make this an appropriate case for enhanced costs. [ 16 ] If the partes are unable to resolve any issue concerning the calculation of interest, or any other issue relating to the implementation of this costs award as directed, they may submit written argument on those issues. Dated at the City of Calgary, Alberta this 29th day of June, 2012. B.E. Romaine J.C.Q.B.A. Appearances: Gary B. Laviolette and J.

Brown of Gowling Lafleur Henderson LLP Solicitors for the Plaintiff (Defendant by Counterclaim) Indutech Canada Limited D. M. McLaughlin and J.M. Doyle of Field LLP Solicitors the Defendants Gibbs Pipe Distributors Ltd., Barry Gibbs Sales Limited, Barry Gibbs and Guy Gibbs and Solicitors for the Plaintiff by Counterclaim Gibbs Pipe Distributors