Strategy Summit Ltd. v. Remington Development Corporation, 2012 ABQB 61

Court of Queen ’ s Bench of Alberta Citation: Strategy Summit Ltd. v. Remington Development Corporation, 2012 ABQB 61 Date: 20120126 Docket: 0601 01094 Registry: Calgary Between: Strategy Summit Ltd. Plaintiff - and - Remington Development Corporation Defendant _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice Gerald A. Verville _______________________________________________________ Introduction [ 1 ] In May 2005, Strategy Summit Ltd. (“Strategy”) offered to purchase from Remington Development Corporation (“Remington”) a portion of unsubdivided land.

Strategy paid a $25,000 deposit upon acceptance of the offer. The offer was contingent upon Remington obtaining subdivision approval and a phase III environmental report. Remington failed to obtain either within the time contemplated in the offer and refused in December 2005 to grant an extension. [ 2 ] Strategy registered a caveat on the title to the unsubdivided lands and claimed specific performance or in the alternative damages. Remington asserted that the caveat prevented it from developing, selling, financing or otherwise dealing with the lands and claimed resulting damages by way of counterclaim.

[ 3 ] Following the trial of this action I issued Reasons for Judgment ( Strategy Summit Ltd v Remington Development Corporation , 2011 ABQB 549 ), dismissing both Strategy's claim against Remington for specific performance or damages and Remington’s counterclaim for damages. [ 4 ] The parties submitted written arguments with respect to costs and subsequently made oral submissions. Randy Remington, the president of Remington, and Brad Ferguson, the president of Strategy, filed affidavits in support of the costs application. Both provided a draft

Schedule C Bill of Costs on Column 5 which were relatively similar in amount. [ 5 ] Each side argues that it is entitled to solicitor client costs, or in the alternative substantial party and party costs, because: it was substantially successful in the lawsuit (or at least more successful than the other party), high costs were reasonably incurred, and the other side unsuccessfully alleged bad faith.

Positions of the Parties [ 6 ] Remington submits that solicitor client costs, or in the alternative a costs award providing 40% to 50% indemnity or more in the form of a lump sum, are warranted for the following reasons: 1. Strategy maintained its allegation that Remington acted in bad faith until the end of trial; 2. Remington was justified in retaining its usual Calgary counsel although the trial was heard in Edmonton; 3. Strategy attempted to conceal its efforts to flip the lands in question and other information in the possession of its real estate broker, Avison Young; 4.

Strategy’s failure to produce the listing agreement and other Avison Young documents delayed the litigation; 5. Strategy had to obtain leave to withdraw an admission made six years before trial; 6. Strategy put up the second deposit of $475,000 six years after the fact; 7. Strategy refused to admit its claim for specific performance had no merit because it was trying to sell the land when it listed it for sale with Avison Young; 8. The caveat filed by Strategy prevented Remington from developing or selling the lands for six years; 9.

Strategy rejected Remington's offer, made the day before trial, to settle the claim and counterclaim on the basis of a discontinuance without costs to any party; at that time, Remington's

Schedule C costs were well over $150,000; 10. Remington took steps to shorten the proceedings;

11. Remington incurred total legal fees of $1,145,000 defending the action, and total expert and other witness fees of $116,725; 12. The property in question is valued at $10,000,000; 13. The action was complex; 14. Shortly before the originally scheduled trial date, Strategy changed lawyers, resulting in delay, duplication of trial preparation work, and additional legal costs. [ 7 ] Strategy responds to Remington's arguments and submits that if any party is entitled to solicitor client costs it is Strategy, its fall back position being that each party should bear their own costs for the reasons set out below: 1.

The contractual dispute between Strategy and Remington required Strategy to present its case on the basis that Remington did not act in good faith; 2. Strategy's alternative claim for damages was for $2.5 million; Remington filed a Statement of Defence and Counterclaim claiming damages of $25 million, thereby raising the stakes considerably; 3. Strategy attempted to have reasonable discussions with Remington in order to resolve the legitimate dispute between the parties, but Remington refused; 4.

Remington maintained throughout the proceedings an allegation of malice on the part of Strategy, and slander of title and damages for wrongfully filing a caveat under s 144 of the Land Titles Act ; 5. Remington hired Calgary counsel, when it knew the trial would take place in Edmonton, where the land was located; 6.

Strategy did not have a copy of the Avison Young Listing Agreement, and had forgotten about it until it was discovered on the Avison Young file; when it was found, Strategy followed legal advice; Avison Young most certainly communicated the essence of whatever it was doing on behalf of Strategy to Remington; Remington chose not to call a principal of Avison Young as a witness at trial; 7.

There was significant evidence at trial that Strategy intended to develop this unique property for a specific purpose, whereas Remington persisted in an allegation that Strategy had no real interest in, or even financial capacity, to purchase the property when it knew full well the principals of Strategy are well known and successful businessmen; 8. Remington agreed to an adjournment of the trial from January to May of 2011; neither party was ready to proceed in January 2011 as Remington had not provided rebuttal expert reports; 9.

The Court found that Strategy did not cause any substantial financial harm to Remington; 10. Remington is no stranger to litigation whereas Strategy has been involved only in this dispute with Remington, and therefore Remington’s reputation has not been adversely affected by the litigation; 11. Remington wanted to win the litigation at any price, and hopes to financially cripple Strategy with a costs award;

12. The Court found that Strategy had a reasonable belief that a caveat may be reasonably filed, that its

interpretation of the wording of the offer was not unreasonable and that malice on its part had not been established 13. Strategy took steps to shorten the proceedings and made a reasonable formal offer demonstrating willingness to compromise; Strategy's withdrawal of an admission had no impact of any significance on the trial; 14.

Remington raised the issue of the second deposit for the first time at the start of trial; this point was not pled, nor was it the subject of any examination for discovery; at law there was no continuing obligation for Strategy to fulfill its further contractual obligations until a court ordered specific performance; 15. Given that Remington's counterclaim was for more than ten times Strategy's claim, costs should be awarded in favour of Strategy for successfully defending the counterclaim; alternatively, the parties should bear their own costs. 16.

Strategy has incurred legal fees and disbursements in advancing its claim and defending the counterclaim in the approximate amount of $665,000. Factors [ 8 ] Under Rule 10.33, when making a costs award, the Court may consider all or any of the following: (

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

b) the amount claimed and the amount recovered; (

c) the importance of the issues; (

d) the complexity of the action; (

e) the apportionment of liability; (

f) the conduct of a party that tended to shorten the action; (

g) any other matter related to the question of reasonable and proper costs that the Court considers appropriate. [ 9 ] Further, in deciding whether to impose, deny or vary an amount in a costs award, the Court may consider all or any of the following: (

a) the conduct of a party that was unnecessary or that unnecessarily lengthened or delayed the action or any stage or step of the

action; (

b) a party's denial of or refusal to admit anything that should have been admitted; (

c) whether a party started separate actions for claims that should have been filed in one action or whether a party unnecessarilyseparated that party's defence from that of another party; (

d) whether any application, proceeding or step in an action was unnecessary, improper or a mistake; (

e) an irregularity in a commencement document, pleading, affidavit, notice, prescribed form or document; (

f) a contravention of or non-compliance with these rules or an order; (

g) whether a party has engaged in misconduct. [10] The parties cite a number of authorities which provide guidance as to when solicitor and client costs should be awarded, whatmatters should be considered when there is a counterclaim, and when

Schedule C Costs should be increased, including: Mahe v.Boulianne, 2010 ABCA 74 at para 6, Phinny v MacAulay, (ON SC) at paras 19 and 21, Evans v The SportsCorporation, 2011 ABQB 616, Cope v Morton, 2004 BCSC 1726, paras 9-11 and Jawanda v Jawanda, 2005 BCSC 1721 at paras 22and 23; Conway v Zinkhofer, 2007 ABQB 2, Hamilton v Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 SCR 303, Buchanan vLamoureux, 2011 ABQB 256, Trizec Equities Ltd v Ellis-Don Management Services Ltd., 1999 ABQB 801, LSI Logic Corp ofCanada Inc v Logani, 2001 ABQB 968, Calgary (City) v Alberta (Minister of Municipal Affairs), 2008 ABQB 433, M Orkin, The Lawof Costs, 2d ed (Aurora, Ont. : Canada Law Book, 1987-), Dwyer v Fox (1996), 1996 ABCA 95 , 181 AR 223 (CA), Johnston vLaw Society of PEI (1987), (PE SCAD), 206 APR 52 (PEI CA), Waterous Investments Inc v Liberton Holdings Ltd(1996), (AB KB), 183 AR 229 (QB), Jackson v Trimac Industries Ltd (1993), (AB KB), 138AR 161, 8 Alta LR (3d) 403 at paras 28-37 (QB), costs orders affirmed 1994 ABCA 199 , 155 AR 42, 20 Alta LR (3d) 117(CA), and Medway Oil & Storage Company Ltd v Continental Contractors Ltd, [1929] AC 88.

I have also reviewed College ofPhysicians and Surgeons of the Province of Alberta v JH, 2009 ABQB 48. [11] I should mention that none of these cases is on all fours with the facts in this case and some only provide guidance on aparticular point. Further, some are more relevant than others regarding the issue of costs. Finally, I am mindful that this Court hasconsiderable discretion when awarding costs.

Solicitor-Client/Solicitor and his own Client Costs [12] Graesser J in College of Physicians and Surgeons of the Province of Alberta at paras 4-23, 2009 ABQB 48 , 468AR 101 summarized some of the factors which militate in favour of a court exercising its discretion to award solicitor-client costs due toparty misconduct: - the conduct of a party has been reprehensible, scandalous or outrageous - the conduct occurred during the course of the litigation - solicitor and client costs might suffice to satisfy the objectives of deterrence and punishment that would otherwise be served by apunitive damage award

- the case is rare and exceptional or unusual - allegations of morally reprehensible conduct by such party are held to be groundless by the trier of fact - there was no reasonable basis on which to commence, or continue, litigation. [ 13 ] In Jackson v Trimac , Hutchinson J set out the rare and exceptional circumstances which might justify solicitor and his own client costs: - circumstances constituting blameworthiness in the conduct of the litigation by that party; - cases in which justice can only be done by a complete indemnification for costs; - where there is evidence that the plaintiff did something to hinder, delay or confuse the litigation, where there was no serious issue of fact or law which required these lengthy, expensive proceedings, where the positively misconducting party was "contemptuous" of the aggrieved party in forcing that aggrieved party to exhaust legal proceedings to obtain that which was obviously his; - an attempt to deceive the court and defeat justice, an attempt to delay, deceive and defeat justice, a requirement imposed on the plaintiff to prove facts that should have been admitted, thus prolonging the trial, unnecessary adjournments, concealing material documents from the plaintiffs and failing to produce material documents in a timely fashion; - where the defendants were guilty of positive misconduct, where others should be deterred from like conduct and the defendants should be penalized beyond the ordinary order of costs; - defendants found to be acting fraudulently and in breach of trust; - the defendants' fraudulent conduct in inducing a breach of contract and in presenting a deceptive statement of accounts to the court at trial; - fraudulent conduct; - an attempt to delay or hinder proceedings, an attempt to deceive or defeat justice, fraud or untrue or scandalous charges.

See also Evans ( supra ). Analysis [ 14 ] Counsel on both sides of this case conducted themselves in an exemplary fashion throughout the course of the trial. They were at all times cooperative. While at times they were tough and probing in cross examination they were all times civil and professional. Clearly there was a level of animosity which existed between the principals of both parties and a level of distrust.

With respect to matters which would elevate a cost award to that of solicitor-client or beyond, I have considered below the principles summarized in Jackson and College of Physicians in light of each party’s assertions (paras 6 & 7 supra ) that the other acted in bad faith.

Against Strategy [ 15 ] With respect to Remington’s assertions against Strategy, I note that Strategy did not expressly allege bad faith against Remington in its Amended Statement of Claim. It asserted that Remington breached its covenant of good faith. However this allegation was in the context of the wording of the offer the parties entered into, which provided in part: 13.2 ...

In the event the Purchaser requests an extension or a variance to any of the time periods set out in this Agreement, the Vendor agrees to in good faith consider the request for such extension or variation and within two (2) days of receiving such request advise the Purchaser of whether the Vendor is in agreement with such a request ... (emphasis added) [ 16 ] Allegations that Remington was not acting in good faith were required by Strategy to advance its claim that it was entitled to an extension, and this was the context within which the lawsuit was fought. This was a matter of contractual

interpretation against the backdrop of legal principles, and then application of the provision - as interpreted by the Court - to the facts of the case.

Paragraphs 154 to 202 of the trial judgment contain a fulsome discussion of this issue with the conclusion being, after a consideration of the case law and evidence, that Strategy did not establish that Remington failed to consider in good faith its request for an extension. [ 17 ] In my view Remington’s submission on this point reduced to its simplest is that Strategy should never have alleged that Remington failed to consider in good faith its request for an extension as once it did so it exposed itself to solicitor client costs.

I disagree. [ 18 ] Remington’s complaint with respect to Strategy’s slow production of the listing agreement with Avison Young is that Strategy persisted in maintaining its caveat and tying up the land for five years when it knew its chance of obtaining specific performance was minimal. It says that it was only after obtaining the listing agreement that it filed its counterclaim. After oral argument, counsel for Strategy provided a letter (copied to counsel for Remington) which clarified the time frame as to when the counter claim was in fact filed.

The letter advised that the Avison Young listing agreement was provided to Remington no later than February 1, 2008 whereas the amendment by Remington to add a counterclaim was done on December 9, 2008 the same date the Statement of Claim was amended. [ 19 ] In my view Strategy’s slow production of the listing agreement did not have a significant impact on the litigation. Remington was aware that Strategy was involved in listing the property. It had a close business relationship with Avison Young.

Further, as noted above it obtained a copy of the listing agreement in early 2008. [ 20 ] Remington further asserts that it suffered lost opportunity costs as well as direct out of pocket costs of around $2,000,000 because of the subdivision. In my view, Remington was simply rearguing in the costs application, a portion of the case it lost at trial. There is another forum for this type of submission.

As to the $2,000,000 incurred because of the subdivision, this was as a result of the contract, not the lawsuit, and it was Remington that decided it would not grant the extension requested by Strategy. [ 21 ] The Court of Appeal in Strategy Summit Ltd v Remington Development Corp , 2009 ABCA 30 overturned a decision by a chambers judge which affirmed an earlier master's decision granting Remington

summary judgement and dismissing Strategy’s claim for specific performance Watson J.A. for the court stated: 6 In our view, there were a considerable number of matters of fact that needed to be resolved by trial in this dispute. The finding by the chambers judge that the appellant only intended the land for a commercial profit on a quick re-sale was disputed and it could not be made without a trial (or perhaps a

summary trial): see Diegel v. Diegel , [2008] A.J. No. 1261 (QL), 2008 ABCA 389 at paras. 18 to 19 . It was in error for him to make a finding on such conflicts in the evidence and examinations. The chambers judge's error in this respect was overriding because it influenced him to believe that the situation before him was one where the appellant's position to justify specific performance was "exceedingly difficult" under Walton , supra at para. 5. 7 The chambers judge proceeded on the premise that the onus was upon the appellant to show that the land was "unique" within the

7 The chambers judge proceeded on the premise that the onus was upon the appellant to show that the land was "unique" within the meaning of the case law, and that the appellant had fallen short of proving this characteristic of the property. The chambers judge did not refer to Mr. Ferguson's evidence as to why the alleged alternative locations did not meet the project needs. Rather, he said that the appellant had to prove they were unavailable [at para. 12], even though the respondent's "best foot forward" was that he did not know if they were available or not at the time.

The conclusion of uniqueness also required a trial. The chambers judge's conclusion is also, with respect, a victim of palpable and overriding error - possibly being a product of the stringent test that he imposed. We cannot agree that the evidence as set out before him failed to establish a workable argument that the property was unique both from its own position and against alternatives.

There was a body of evidence which, arguably, went beyond showing that the appellant was pursuing a "business opportunity" ( Walton , supra at para. 8) or wanted to acquire the property "strictly for resale or development" or "investment purposes" ( Walton , supra at para. 10) compensable by damages. The present case differs from Walton .

The appellant offered evidence that the specific project had a variety of characteristics making it unique and to the benefit of large sectors of the community, as and where planned. 8 In our respectful conclusion, this was not a situation where there was "no genuine issue" or "no real chance of success" or a "non-existence of material issues" to justify

summary judgment dismissing the appellant's entire lawsuit. The appeal is accordingly allowed, the

summary judgment is set aside and the case is returned to the Court of Queen's Bench. [ 22 ] Further with respect to the caveat filed by Strategy, I made the following finding: [208] I am satisfied that Strategy had a reasonable belief at the material time that it had an interest in the property, and that a caveat may reasonably be filed. Although I have found that Remington did not breach its obligation under the Offer to consider in good faith Strategy's request for a further extension, Strategy's

interpretation of the wording of the Offer in the context, while not correct, was not unreasonable. Further, although the Arena Concept was somewhat up in the air in December 2005, I find that Strategy had not given up on the project. In the circumstances, I find that Strategy reasonably believed that it had a sufficient interest in land at the time it filed the caveat. Further, in my view, malice on the part of Strategy has not been established. [ 23 ] In Evans , Graesser J. noted: 67 Solicitor and client costs are also routinely sought after trial, often without any proper basis or foundation.

I am reluctant to see the costs process become another trial after the trial, revisiting every strategic decision, paragraph in pleadings, application, position, question on direct and question on cross-examination, looking for misconduct.

Such a process would seem to run afoul of the foundational rule 1.2 relating to proportionality, economy and efficiency, although this process does appear to be invited by Rule 29.33. [ 24 ] In my view the types of arguments raised by Remington are precisely what Graesser J. was referring to in Evans , namely revisiting each step Strategy took in the litigation.. [ 25 ] I find taking into consideration the nature of this lawsuit, that Strategy’s conduct does not fall within the rare and exceptional case where solicitor and client costs are warranted .

I therefore dismiss Remington’s application for solicitor-client costs. Against Remington [ 26 ] Although Remington may have taken a hard nosed approach in this action, I am not satisfied that it did anything which could be categorized as circumstances constituting blameworthiness in the conduct of the litigation.

Further, I am not satisfied that there were any other circumstances where there was conduct by Remington which would warrant solicitor and client costs. [ 27 ] In my view, the trial itself proceeded in an expeditious fashion and was shortened by perhaps a few days when Remington decided it was unnecessary to call two witnesses it initially indicated it would call.

Strategy unsuccessfully submitted in argument that an adverse inference should be drawn against Remington for failing to call these witnesses (Paras 140-146, Reasons for Judgment). [ 28 ] In the circumstances of this case, I find that Strategy is not entitled to solicitor-client costs.

Increased

Schedule C Costs [ 29 ] In Trizec Equities , Mason J. considered factors relevant to an increase in costs, including the following: - the time for preparing and organizing documents for the purposes of production; - the preparation time required in relation to examinations for discovery; - the utilization of technology and computers to prepare immediate court records; - the inordinate efforts involved in collating testimony and thousands of pages of exhibit documents in order to prepare written submissions following trial; - the fact that these trials consume counsels' time for many months to the exclusion of any other work - given the magnitude of the damages sought some defendants without the benefit of adequate insurance coverage had little choice but to defend against the claims, a task which, by itself, had the potential to bankrupt both parties. [ 30 ] Strategy in its Amended Statement of Claim sought inter alia an order declaring that its caveat was validly registered against the lands, specific performance or in the alternative judgment in an amount not less than $2,500,000.

Remington in its Amended Amended Statement of Defence and Counterclaim sought damages in excess of $25,000,000, asserting that Strategy committed slander of title by filing the caveat. Randy Remington testified at the trial that Remington made a profit of $22,000,000 when it developed adjacent lands referred to as the Eastern Block and sold the development to a pension fund (Para. 67). This testimony was supported by that of a chartered account and chartered business valuator who gave expert testimony on behalf of Remington. [ 31 ] The trial, absent oral argument, took 25 half days.

Three ordinary witnesses were called on behalf of Strategy and five on behalf of Remington. In addition each party called three expert witnesses. [ 32 ] This was an “electronic” trial in that almost five hundred documents some of which consisted of numerous pages were listed on an XL spread sheet. A significant number of these documents were referred to during the course of the trial. The spread sheet gave each document a number, identified the type of document, the title of the document, the author and the recipient.

Simply clicking on the document number on the spread sheet produced the document in PDF on a number of screens. A program was available for the convenience of the Court which permitted notes or highlighting to be made on these documents while in electronic PDF form solely on my screen as well as for them to be copied into WordPerfect. This elaborate undertaking was undertaken by counsel for Strategy with the full cooperation of counsel for Remington. [ 33 ] In my view the trial proceeded in an expeditious manner.

Prior steps taken in the litigation including proceeding to the Court of Appeal were not unreasonable. The stakes were high. [ 34 ] There was evidence of some effort on the part of Strategy to settle prior to trial, and what I would characterize as a half- hearted offer by Remington at the 11 th hour to allow both parties to walk away from the litigation. [ 35 ] In the end result both parties were left in the same position they were in prior to engaging in the litigation, except that they had both expended significant amounts in legal and related fees.

Strategy’s claim for specific performance or alternatively damages was dismissed as was Remington’s much larger counterclaim for damages. In the end both parties lost. I agree with the submission of

counsel for Strategy that the counterclaim which was roughly ten times the amount of the Strategy damages claim considerably increased the stakes ( Phinny supra ). Although dismissed, it was a serious claim. [ 36 ] While this was a case where after taking into consideration some of the factors referred to in Trizec, a winner might have been entitled to a costs award providing 40% to 50% indemnity or more in the form of a lump sum, it is my view that there was no winner. In the circumstances of this case, I find that each party should bear their own costs.

Summary of Conclusions [ 37 ] I find that: 1. The applications of the parties for solicitor and client costs are dismissed as are the applications for increased party and party costs. 2. Each party should bear its own costs. Heard on the 19 th day of January, 2012. Dated at the City of Edmonton, Alberta this 24 th day of January, 2012. Gerald A. Verville J.C.Q.B.A. Appearances: Graham McLennan, Q.C., McLennan Ross, Edmonton for the Plaintiff, Defendant by Counterclaim Grant Vogeli, Burnet, Duckworth & Palmer LLP for the Defendant, Plaintiff by Counterclaim