Alberta Treasury Branches v., 2013 ABQB 748

Court of Queen ’ s Bench of Alberta Citation: Alberta Treasury Branches v. 1401057 Alberta Ltd. (Katch 22), 2013 ABQB 748 Date: 20131220 Docket: 1110 00801, 1110 00802 Registry: Red Deer Between: Docket: 1110 00801 Alberta Treasury Branches Appellant (Plaintiff) - and - 1401057 Alberta Ltd. operating as Katch 22 and Tomita Eleanor Walker also known as Tomita Dix Respondents (Defendants) And Between Docket: 1110 00802 Alberta Treasury Branches Appellant (Plaintiff) - and - Tomita Eleanor Walker Respondent (Defendant)

Corrected judgment: A corrigendum was issued on April 21, 2016; the corrections have been made to the text and the corrigendum is appended to this judgment. Corrected judgment: A corrigendum was issued on January 10, 2014; the corrections have been made to the text and the corrigendum is appended to this judgment. _ ________________________________________ ______________ Reasons for Decision of the Honourable Mr. Justice Thomas W. Wakeling _________________________________________ ______________ I. Introduction [ 1 ] Alberta Treasury Branches, pursuant to rule 10.26(1) of the Alberta Rules of Court , Alta.

Reg. 124/2010, appeals [1] decisions of a review officer which it alleges wrongly failed to enforce a court order requiring the defendants, persons who borrowed money from Alberta Treasury Branches, to indemnify the lender for fees the lender paid its legal counsel to enforce its rights under loan agreements. The review officer’s decisions obliged the borrowers to pay for roughly half of Alberta’s Treasury Branches legal fees. He understood that a fee guideline applied to this transaction and compelled this result. II.

Questions Presented [ 2 ] What is the standard of review on an appeal under rule 10.26(1) of the Alberta Rules of Court ? May this Court revoke the review officer’s decision if it contains an error of principle, is based on a clearly erroneous fact or is inordinately high or low? [ 3 ] Did the review officer apply the correct principles? He stated that he based his decision on a fee guideline for foreclosure of residential mortgages.

What are the correct principles? [ 4 ] If the review officer did not apply the correct principles and mistakenly concluded that he was obliged to implement a fee guideline, what is the proper remedy? Should this Court revoke the decision of the review officer and substitute its own decision of what the appropriate fee is or should it refer the matter back for review by a different review officer? These are some of the options listed in rule 10.27(1) of the Alberta Rules of Court . III.

Brief Answers [ 5 ] This Court may vary or revoke the decision of the review officer if the review officer’s decision was based on an incorrect principle or a clearly erroneous factual determination or the award is inordinately high or low. The review officer based his decision on an incorrect principle. He applied a fee guideline the masters prepared to introduce consistency into decisions of assessment officers assessing costs in undefended and routine residential foreclosure actions.

He did not consider the merits of Alberta Treasury Branches’ indemnification claim or apply the general principle governing court-ordered costs. He failed to appreciate that the Court of Queen’s Bench ordered the defendants to indemnify fully Alberta Treasury Branches for the amounts it paid its lawyers to protect its security interest. [ 6 ] The Alberta Rules of Court assign review officers an important role in determining appropriate legal fees in cases like this. A review officer should consider this matter afresh, applying the considerations cataloged in the principles set out in this decision.

The review officer should enforce the borrower’s promise to indemnify the lender for the legal fees it paid to enforce its rights under the loan agreements in accordance with governing principles. There is no compelling reason not to. IV. Applicable Rules of Court [ 7 ] The relevant rules of the Alberta Rules of Court are set out below:

10.2(1) Except to the extent that a retainer agreement [2] otherwise provides, a lawyer is entitled to be paid a reasonable amount for the services the lawyer performs for a client [3] considering (

a) the nature, importance and urgency of the matter; (

b) the client’s circumstances, (

c) the trust, estate or fund, if any, out of which the lawyer’s charges are to be paid, (

d) the matter in which the services are performed, (

e) the skill, work and responsibility involved, and (

f) any other factor that is appropriate to consider in the circumstances. … 10.9 The reasonableness of a … lawyer’s charges are subject to review by a review officer in accordance with these rules, despite any agreement to the contrary. … 10.13(1) A … client may, by request, obtain from a review officer an appointment date for a review of a retainer agreement between the lawyer and the client. … 10.19(1) A review of a lawyer’s charges must take into consideration the factors described in rule 10.2, except to the extent that a Retainer Agreement provides otherwise. … 10.26(1) A party to a review officer’s decision under this Division may appeal the decision to a judge.

(2) The appeal from a review officer’s decision is an appeal on the record of proceedings before the review officer. … 10.27(1) After hearing an appeal from a review officer’s decision, the judge may, by order, do one or more of the following: (

a) confirm, vary or revoke the decision; (

b) revoke the decision and substitute a decision; (

c) revoke all or part of the decision and refer the matter back to the review officer or to another review officer; (

d) make any order the judge considers appropriate. V. Statement of Facts [ 8 ] Alberta Treasury Branches lent $100,000 to Tamita Eleanor Walker under a personal line of credit agreement dated June 14, 2006 secured by a mortgage on approximately 4.1 acres of land. In 2008 the same lender also made three additional loans to 1401057 Alberta Ltd. and Tomita Eleanor Walker. Security for the three additional loans consisted of a general security agreement between the lender and the borrowers and a mortgage by Ms. Walker in favour of the Alberta Treasury Branches.

The borrowers agreed to indemnify fully the lender for legal fees the lender incurred to collect outstanding amounts under the loan instruments. [ 9 ] As the borrowers failed to discharge their obligations under these loan instruments, in 2011 Alberta Treasury Branches commenced proceedings in the Court of Queen’s Bench seeking judgment against them, including sale or foreclosure of the mortgaged lands. Ultimately the defendants discharged their obligations to the plaintiff.

Consent orders in both actions awarded the plaintiff “cost of this action on a solicitor and own client basis”. [ 10 ] The plaintiff submitted to the defendants the accounts of its legal counsel and demanded payment. The amount claimed, including fees ($13,824.50), charges ($924.50) and disbursements ($1,588.60), was $16,342.64.

As they were entitled to do under rule 10.13(1) of the Alberta Rules of Court , given their status as clients [4] , the defendants obtained an appointment with the review officer. [ 11 ] The review officer heard the parties and certified the amount to be paid for fees at roughly fifty percent of the amount the plaintiff paid its counsel. His explanation for this reduction appears below: In terms of fees, this is a situation where we have two foreclosures against the same party.

Town Hall meetings that were conducted back in 2011 by the Masters, they wanted to ensure that there was some consistency in relation to costs as it relates to foreclosures and they basically told the hearing officers that for straightforward foreclosure, from beginning to end, you could expect to allot fees in the range of $2800 to $3200. [The Masters] ... indicated to us that if [mortgagees] ... were going to ask for additional monies, then they should give us a detailed explanation as to what those additional costs were for.

The only additional step that I see taken here was an application for substitutional service which apparently was not even utilized once

the order was granted. ... I am not seeing any additional steps that were taken here. ... So, on that first account, that being Action 1110-00801, I am going to allow fees of $3200. ... ...

In these circumstances, the fees on the second one that I will allow will be $2800. [12] The town hall meeting to which the review officer referred was the subject of a March 2, 2011 letter from the manager of theCourt of Queen’s Bench at the Red Deer judicial centre to the Central Alberta Bar Association, part of which reads as follows: There are a number of changes that have occurred province-wide to provide to provide for uniformity with respect to the documentationfiled by counsel [for foreclosure proceedings] and assessment of Bills of Costs.

These important changes were discussed at a Town HallMeeting which occurred in Edmonton on December 1, 2010. … The Judicial District of Red Deer has adopted these changes as of July24, 2011. … I can advise of the following items that have changed from the fee guideline of 2008 …: 1. Fees (Redemption Order Stage), the allowable range is $1800 to $2000 (excessive of GST and disbursements). If you claimhigher, please supply a letter to justify the extra amount as well as your time records for review; 2.

Fees (at the Order for Sale stage from beginning to end of file), the allowable range will be $3000 to $3500 (exclusive of GSTand disbursements). If you claim higher, please supply a letter to justify the extra amount as well as your time records for review. [13] The fee range indicates the amount the assessment officer will use in finalizing a bill of costs in a routine undefendedresidential foreclosure proceeding. [14] My review of the minutes of the December 1, 2010 town hall meeting indicates that a committee had prepared template orderswhich the masters hoped would be utilized by the foreclosure bar.

In addition, it was clear that the review officers in Edmonton andCalgary had drafted a “standard guideline … with respect to costs”. [15] On March 20, 2013 Alberta Treasury Branches filed appeals against the two decisions of the review officer. VI. Analysis A.

Standard of Review [16] Assuming that a review officer had jurisdiction to make a decision and adopted a fair hearing process, the Court may onlyvary or revoke a review officer’s decision, exercising its jurisdiction under rule 10.27(1) of the Alberta Rules of Court, if the decisionreflects “an error of principle or whether the award is inordinately high or low”. McLennan Ross v. Keen Industries Ltd. (No. 2), 1988ABCA 224 , 86 A.R. 311, 313 (C.A. 1988). A factual determination that is clearly wrong may also justify intervention. Carterv. Blake, 41 A.R. 418, 422 (N.W.T.C.A. 1982).

Our Court of Appeal has not said so but several Queen’s Bench of Alberta justices have.Repchuk v. Silverberg, 2013 ABQB 305, ¶ 38 & Fraser Milner Casgrain LLP v. Kristof Financial Inc., 2012 ABQB 359, ¶¶ 16 & 17. B. General Principles Governing Court-ordered Costs Payable by a Litigant toAnother Litigant [17] In this

part I will discuss the general principles governing court-ordered costs payable inter partes. On occasion, I will refer tothe norms applicable to the assessment of a client’s obligation to pay the fees charged by the client’s lawyer. This will be done if such adiversion is necessary to better understand the main topic. [18] The first costs principle is that the Court of Queen’s Bench of Alberta is responsible for settling, if asked to do so, the amounta lawyer is entitled to for the performance of legal services for a client or the amount one litigant must pay another litigant as a result of acosts order.

This is on account of its inherent jurisdiction and the Court of Queen’s Bench Act, R.S.A. 2000, c. C-3, s.21. See Harrison v.Tew, [1990] 2 A.C. 523, 530 (“courts had ... inherent jurisdiction over solicitors as officers of the court to direct taxation of their bills”);Danoil Energy Ltd. v. Olson, (SK CA), [1993] 7 W.W.R. 385, 392 (Sask. C.A.) (“The authority to award costs is partof the general powers of the Court”) & Peddle v. Toller, 162 Eng. Rep. 1160, 1161 (Prerogative Ct. 1830) (“This Court has considerableauthority over its own practitioners and officers.

This authority forms a part of the jurisdiction inherent in all Courts, which they arebound to exercise for the protection of their suitors against imposition and extortion”). [19] Lawyers who are members of The Law Society of Alberta are known as barristers and solicitors. They are expresslydesignated as officers of the Court of Queen’s Bench of Alberta and other courts of record.[5] Legal Profession Act, R.S.A. 2000, c. L-8,s. 102.

It follows that Law Society members are subject to this jurisdiction of the Court of Queen’s Bench.[6] [20] This jurisdiction has historical roots. [21] Its legislative origin can be traced to 1729. That year Parliament passed

An Act for the Better Regulation of Attornies andSolicitors, 2 Geo. II, c. 23, s. 23.[7] This law governed the fees charged by attorneys[8] and solicitors practising in the courts of law orequity in England. After June 30, 1729 an attorney[9] and solicitor could not “commence or maintain any action or suit for the recoveryof any fees, charges or disbursements at law or in equity, until the expiration of one month or more, after such attorney or solicitor …shall have delivered unto the party or parties to be charged therewith a bill of such fees, charges and disbursements, written in a common

legible hand and in the English tongue … which bill shall be subscribed with a proper hand of such attorney or solicitor …”. If a clienttook no exception to the bill, the lawyer could proceed with his action. If a client objected to the bill, the client could ask, withoutpayment of a fee, the court,[10] in which the majority of the legal work was done, to consider the bill and to determine the “sum … to be… due thereon”. An action for recovery on the unpaid sum could not proceed until the taxation process was concluded.

After the courthad taxed the bill and determined the sum due, the client was obliged to “forthwith pay” to the attorney or solicitor the sum due. If theclient failed to pay, the client “shall be liable to an attachment or process of contempt, or to such other proceedings at the election of the… attorney or solicitor”. Costs were payable by the lawyer if more than one-fifth of the bill was written off.

If there was no reduction orthe reduction was less than one-fifth, the “Courts in their discretion shall charge the attorney or client, in respect of the reasonableness orunreasonableness of such bills”. [22] The court exercised its inherent jurisdiction over attorneys and solicitors as officers of the court before 1729 and ordered themto submit their bills to taxation. Ex p. Arrowsmith, 33 Eng. Rep. 241 (Ch. 1806) (“the jurisdiction to tax the bills of attorneys andsolicitors, as officers of the courts, subsisted long before the [1729] Statute”) & Ex p. Earl of Uxbridge, 31 Eng.

Rep. 1126 (Ch. 1801)(“the [1729] Statute did little more than introduce the regulations, under which the jurisdiction should be exercised”). [23] The 1729 Act did not apply to barristers. There was no reason to apply it to barristers. Roughly one hundred years before thepassage of the 1729 Act it was determined that a barrister,[11] unlike an attorney or solicitor,[12] could not sue for his fees. [24] The explanation for denying the barrister the right to sue was based on the notion that a barrister was without capacity tomake a contract for the provision of his legal services.

Chief Justice Erle gave the explanation for the rule: The incapacity of the advocate in litigation to make a contract of hiring affects the integrity and dignity of advocates, and so is in closerelation to the highest of human interest – namely, the administration of justice. ... … If the law if that the advocate is incapable of contracting for hire to serve … his words and acts ought to be guided by a sense of duty -… duty to his client, binding him to exert every faculty and privilege and power in order that he may maintain that clients rights togetherwith duty to the court and himself, binding him to guard against abuse of the powers and privileges intrusted to him, by a constantrecourse of a sense of right.

If an advocate with these qualities stands by the client in time of his utmost need, regardless alike of popularclamour and powerful interest, speaking with a boldness which a sense of duty can alone recommend, we say the service of such anadvocate is beyond all price to the client; and such men are the guarantees to communities for the maintenance of their dearest rights, andthe words of such men carry a wholesome spirit to all who are influenced by them.

Such is the system of advocacy intended by the law,retiring the remuneration to be by gratuity; but if the law allowed the advocate to make a contract of hiring and service, it may be that hismind would be lowered and that his performance would be guided by the words of his contract rather than by principles of duty; thatwords sold and delivered according to contract for the purpose of earning higher would fail of creating sympathy and persuasion inproportion as they were suggestive of effrontery and selfishness, and that the standard of duty throughout the whole class of advocatesmight be degraded. Kennedy v.

Broun, 7 L.T.R. 626, 632 (C.B. 1863). As a consequence, “the employment of a barrister is a purely honorary one in thesense that it confers on him no legal right to remuneration for his services”. J. Marchant, Barrister-at-Law: An Essay on the LegalPosition of Counsel in England 51 (1905). [25] The second costs principle is that a court has discretion[13] to issue a costs order. Bossé v. Mastercraft Group Inc., (ON CA), 123 D.L.R. 4th 161, 178 (Ont.

C.A. 1995) (“costs ... are, subject to the provisions of a statute or the rules of court,in the discretion of the court”). [26] Both the Court of Queen’s Bench Act, R.S.A. 2000, c. C-31, s. 21 and the Court of Appeal Act, R.S.A. 2000, c.

C-30, s. 12state that [s]ubject to an express provision to the contrary in any enactment, the costs of and incidental to any matter authorized to be taken beforethe Court or a judge are in the discretion of the Court or judge and the Court or judge may make any order relating to costs that isappropriate in the circumstances. [27] As well, rule 10.31(1) of the Alberta Rules of Court, set out below, confirms the discretionary nature of a 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 costsaward, 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 partyincurred to participate in an application, proceeding or action, or (

b) any amount that the Court considers to be appropriate in the circumstances, including, without limitation, (

i) an indemnity to a party for that party’s lawyer’s charges, or (ii) a lump sum instead of or in addition to assessed costs. …

(3) In making a costs award under subrule (1)(a), the Court may order any one or more of the following: (

a) one party to pay to another all or part of the reasonable and proper costs with or without reference to

Schedule C …;

…

(6) The Court’s discretion under this rule is subject to any specific requirement of these rules about who is to pay costs and what costsare to be paid. [28] The second principle is so important that a contractual provision relating to costs does not oust the court’s jurisdiction to setcosts as it sees fit. Bossé v. Mastercraft Group Inc., 123 D.L.R. 161, 178 (Ont. C.A. 1995). [29] The third costs principle is that a court, in exercising its discretion, must act in a principled manner. A cost inquiry must beconducted within a logical framework.

The absence of such a framework introduces arbitrariness and uncertainty. Its presence promotesrationality and consistency.[14] Dr. Lushington, an Admiralty Court judge, lamented navigating in a region without a guiding star: There is no question that can come before the court which is so disagreeable as that of reviewing taxation of costs, because it ismanifestly clear that, for the greater part, it is impossible to find a clear principle whereon to proceed, and whether the charge be right orwrong depends upon a practice, and upon a practice with which the court cannot be familiar... .

The Kestrel, 16 L.T.R. 72, 73 (Admir. Ct. 1867). [30] Rule 10.2(1) of the Alberta Rules of Court sets out some factors the consideration of which assists in determining whatremuneration is reasonable. So does the commentary to 2.06(1) of The Law Society of Alberta’s Code of Conduct. These provisions referto the amount of time devoted to the project, the nature of the problem, the skills needed to resolve the problem, the results obtained andany fee agreement between the lawyer and the client.

Each fact pattern is unique and requires an individual assessment. [31] Some of the costs principles which follow also assist in ascertaining appropriate costs awards. [32] The fourth costs principle is that, absent exceptional circumstances,[15] the unsuccessful party pays the successful party asum intended to indemnify the successful party for all or a portion of its legal fees. This principle originated in the Statute of Gloucester,6 Edw. I., c. 1 (1278) and has been a central part of the common law for a very long time. G. Morgan & E.

Wurtzburg, A Treatise on theLaw of Costs in the Chancery Division of the High Court of Justice (1882) & Goodhart, “Costs”, 38 Yale L.J. 849, 852 (1929). [33] The fifth costs principle is that, in most cases, the successful party will only receive partial indemnity. In other words, thesuccessful party will have to bear most of its legal costs itself. This is the case if the court awards costs based on the prevailing tariff.[16]Most jurisdictions refer to this as party-and-party costs. Ed Miller Sales & Rentals Ltd. v.

Caterpillar Tractor Co., 1998 ABCA 118, 216 A.R. 304, 307 (C.A. 1998) (a court order awarding a successful party its tariff costs generally represents “a fraction ofsolicitor-client costs”); L. Abrams & K. McGuinness, Canadian Civil Procedure Law 1456 (2d ed. 2010) (in Ontario “a successfullitigant will normally recover … one-third to 40 percent of actual legal fees and disbursements”) & 1 M.

Orkin, The Law of Costs 2-11(2d ed. looseleaf August 2010 release). [34] The sixth costs principle is that, in the absence of a contractual term committing one party to pay the other’s costs on a full-indemnity basis, costs are awarded to a successful party on a full-indemnity basis only in exceptional cases. Enron Canada Corp. v. National-Oilwell Canada Ltd., 2001 ABCA 177 , 202 D.L.R. 4th 523, 526 (Alta. C.A. 2001); Reilly v. Wachowich, 2000 ABCA241 , [2001] 1 W.W.R. 55, 82 (Alta. C.A. 2000); Sidorsky v. CFCN Communications Ltd., 53 A.R. 3d 255, 264 (C.A. 1997); Canada Deposit Insurance Corp. v.

Canadian Commercial Bank, 1989 ABCA 150 , 61 D.L.R. (4th) 161, 170 (C.A. 1989);Jacobi v. Board of Education of Aqueduct Roman Catholic Separate School District No. 374, (AB KB), 153 A.R.241, 248 (Q.B. 1994) & Petrogas Processing Ltd. v. Westcoast Transmission Co., (AB KB), 73 Alta. L.R. 2d 246,255 (Q.B. 1990). Blameworthy litigation or prelitigation conduct may create a rare and exceptional case. Reilly v. Wachowich, 1999ABQB 639 , [2000] 4 W.W.R. 92, 104 (Alta.

Q.B. 1999) (prelitigation conduct characterized as “unilateral”, “outside theconstitutional framework”, without “good faith” and “unconscientious”); Olson v. New Home Certification Program of Alberta, (AB KB), 44 Alta. L.R. 2d 207, 229 Q.B. 1986) (abhorrent and intolerable trial conduct justify a full indemnity award);Canadian Deposit Insurance Corp. v. Canadian Commercial Bank, (AB KB), 76 A.R. 271, 275 (Q.B. 1987)(misconduct or deception of the court may justify a full indemnity costs order) & Jackson v.

Trimac Industries Ltd., (AB KB), 138 A.R. 161, 173-74 (Q.B. 1993) (prelitigation conduct “calculated to deliberately harm” the other party may justify a fullindemnity order). See also Andrews v. Barnes, 39 Ch. D. 133, 140-41 (C.A. 1888) (Court of Chancery had jurisdiction to award fullindemnity costs). [35] Contracts may contemplate the existence of litigation between the parties and allocate the burdens associated with it,including provisions obligating the payment of legal costs at stipulated levels under specified circumstances.

The seventh costs principleis that a court may choose to hold a party to its promise. Canada Deposit Insurance Corp. v. Canadian Commercial Bank, 1989 ABCA 150 , 61 D.L.R. (4th) 161, 170 (Alta. C.A. 1989) (“Solicitor-client costs … have frequently been ordered in Alberta foreclosureactions, as a matter of course, in accordance with the contract between the parties”); Central Mortgage & Housing Corp., (AB CA), 61 D.L.R. (2d) 97, 105 (Alta. Sup. Ct. App. Div. 1967) (the court recognized that a mortgagor’s promise to indemnify themortgagee for stipulated legal fees should be enforced); HSBC Bank of Canada v.

Lourenco, 2012 ABQB 648, ¶ 26 (“the bank is entitledto its costs from Triple J ... on a solicitor and client basis based on Clause 4.1.11 of the [general security agreement]”); Kalke v. 213156Holdings Ltd., 47 A.R. 215, 217 (Q.B. 1983) (“This language, in my opinion, entitles the mortgagee to a complete indemnity for costs;he is entitled to recover even solicitor and client costs which in the absence of such sweeping words would have to be paid by themortgagee”); Central Mortgage and Housing Corp. v. Johnston, (SK CA), 20 D.L.R. (3d) 622, 627 (Sask.

C.A. 1971)(“the appellant ... is entitled to the taxed costs of the mortgage action on a solicitor-and-client basis”); Royal Bank of Canada v. Toews,296 Sask. R. 3d 129, 133 (Q.B. 2007) (It is well-established that when a mortgagor covenants to pay solicitor-client costs in a mortgage,the mortgagee will not be deprived of such costs unless it is guilty of vexatious or oppressive conduct”); Collins v. Forest Hill InvestmentCorp., (ON SC), [1967] 2 O.R. 351, 364-65 (Co. Ct.) (a mortgagor who promised to indemnify the mortgagee understipulated conditions must discharge his promise); District Bank Ltd. v.

Adelphi Hotel (Brighton), Ltd., [1953] 2 All E.R. 498, 502 (Ch.Div.) (full indemnify will be awarded if “the party asking for it can show that he is entitled to it ... under some contract plainly andunambiguously expressed”) & Re Griffith Jones and Co., 50 L.T.R. 434, 434 (C.A. 1883) (“a mortgagor must pay all of the costs of the

mortgagee including those payable by the latter to his solicitor”). See also Morrison v. Rod Pantony Professional Corp., 2008 ABCA145 , 429 A.R. 259, 266 (C.A. 2008) (“Courts should not set aside agreements between solicitors and clients without goodcause”). Or it may not. AGF Trust Co. v. Soos, 2012 ABQB 747, ¶ 16 (Master) (the Master declined to require the mortgagor to pay the mortgagee’s legal costs); Bossé v. Mastercraft Group Inc., (ON CA), 123, D.L.R. 4th 161, 178 (Ont. C.A. 1995) (“Thecourt may refuse to enforce the contractual rights where there is good reason for so doing”) & L. Abrams & K.

McGuinness, CanadianCivil Procedure Law 1457 (2d ed. 2010) (“Although such a contractual entitlement is a relevant consideration, the court is not bound togive effect to it”). [36] It is necessary to consider in more detail the inquiries which must be undertaken to give effect to this principle. [37] If A and B enter into an agreement whereby A promises to indemnify B for any legal fees B pays to C under specifiedconditions,[17] a review officer asked by A to determine what A’s obligation to B is under the fee indemnification agreement, mustenforce the fee indemnification agreement[18] unless there is a compelling reason not to.[19] [38] A’s obligation under the fee indemnification agreement is to pay to B a sum equal to the fees B has paid to C for legalservices that are specified in the fee indemnification agreement.

If A has promised to indemnify B for legal services provided by C toprotect B’s mortgage security, A is not bound to indemnify B for legal services C provided to B relating to employment matters in B’sbusiness. See Re Solicitors, (ON SC), [1972] 3 O.R. 433, 436 (Sup. Ct. Taxing Office) & AGF Trust Co. v.

Soos, 2012ABQB 747, ¶ 13 (Master) (the Master suggested a mortgagor should not be responsible for the costs a law firm charges to processpayments from the mortgagor because these are services the mortgagee should perform and are not legal services). [39] And for what part of the stipulated legal services performed by C for B should A be held responsible?

The eighth costsprinciple is that a legal service performed by C which increases the likelihood the purpose stipulated under the specified conditions willbe achieved is a legal service specified in a fee indemnification agreement for which A must indemnify B. [40] The requirement that a legal service increases the likelihood the purpose stipulated under the specified conditions in a feeindemnification agreement is achieved is a low standard. It may be less demanding than some of the tests adopted by other courts. But Iam not sure. Other courts have preferred slightly different wording.

The Saskatchewan Court of Appeal, in Fleck v. Whitehead, (SK CA), [1924] 4 D.L.R. 797, 800, approved fees if they related to steps “properly” or “necessarily” undertaken. In RoyalBank of Canada v. Toews, 2007 SKQB 142 , 296 Sask. R. 129, 133 (Q.B. 2007) the Court asked if a step was “appropriate,necessary and reasonable in the circumstances” or was “properly … [taken] to recover the mortgage money”. See Canadian MortgageInvestment Co. v. Baird, (AB KB), 30 D.L.R. 275, 277 (Alta. Sup. Ct. 1916) (the court asked whether a step was“reasonably incurred in ... efforts to realize [the security]).

Justice Wimmer, in Saskatchewan Trust Co. v. Dion, (SKKB), 127, Sask. R. 64, 65 (Q.B. 1994), was content to inquire if the legal costs were “reasonable … and have been necessarily incurred”.Much earlier, the Admiralty Court in The Kestrel, 16 L.T.R. 72, 73 (1867) determined that recoverable costs are those necessary toprotect the mortgagee’s interest. Most of the time the two different tests – increase the likelihood of success or necessary for the properpresentation - will produce the same outcome. But I can envisage fact patterns where they might not. Suppose that C had three counselappear on an appeal.

Some review officers may agree that the presence of three counsel - each may have different areas of expertisewhich may be needed to answer questions from the court – may increase the likelihood B would prevail on the appeal but would not benecessary for the proper presentation of the case. They may be of the view that the likelihood the court will pose questions to leadcounsel which she cannot answer is too low to justify the extra cost associated with the presence of two other lawyers. Alberta v. AlbertaProvincial Judges’ Association, C.A.

Docket 18200, December 7, 1999 (“We were a little surprised to notice that both sides had three[eminent] counsel gown for the appeal”); Peel v. London and North Western Railway (No. 2), [1907] 1 Ch. Div. 607, 614 (H.C.) (“Icannot … see why … it was necessary for a prudent person, endeavoring to get justice, but endeavoring to get justice without any undueexpenditure of money, to employ more than two counsel”). Others may be convinced that the presence of three highly skilled counselmay be necessary for the proper presentation of a complex appeal. Kirkwood v. Webster, 9 Ch.

D. 241, 242 (H.C. 1878) (the court setaside the Taxing Master’s decision disallowing costs for three counsel because “a reasonable and prudent man, acting with ordinaryprudence, would not have ventured to come into Court without three counsel”); Ed Miller Sales & Rental Ltd. v. Caterpillar Tractor Co.,1998 ABCA 118 , 216 A.R. 304, 306 (C.A. 1998) (“If ever there was a suit which did not call for penny-pinching half measuresby the defendant, this was it”) & Forster v. Davies, 33 L.J.

Ch. 185, 187 (1863 Ch.) (“In difficult cases it has been the practice to takethe opinion of leading counsel”). [41] Fee indemnification agreements may expressly exclude legal services even if they increase the likelihood the purposestipulated under the specified conditions will be achieved and the costs incurred is justified under the circumstances.[20] This would bethe result if there was a fee cap of some form or a provision excluding compensation for some designated legal services. [42] The ninth cost principle is that a party who is ordered to indemnify another party for its legal fees is not responsible for costsassociated with unnecessary steps.[21] A step may be unnecessary even if it increases the likelihood the purpose of the retainer will beachieved.

For example, a lawyer may decide to devote time in the early stages of a file to researching the law governing unlikelyproblems which may arise to reduce the risk that the unlikely problem will adversely affect the final outcome. In some fact patterns thecost may outweigh the benefits the extra research represents. Justice Denning, as he then was, in Goodwin v.

Storrar, [1947] 1 K.B. 457,458 (1946), declared that an indemnitor must not be asked to pay for unusual or unnecessary costs: “[I]f a client authorizes his solicitor toincur any unusual or unnecessary expense it is only right that he should reimburse his own solicitor for it, but it does not follow that heshould be able to recover it from the opposite side”. So did Chief Justice McRuer in Magee v. Board of Trustees of Roman CatholicSeparate Schools for City of Ottawa, (ON SC), 32 D.L.R. (2d) 162, 165-66 (Ont. H.C. 1962).

He opined that “wherethe costs are to be paid by a third-party, only those costs that are necessary for the proper presentation of the case may be recovered …[or] fairly incurred in making a proper presentation of the case …”.

See also In re Cohen & Cohen, [1905] 2 Ch. 137 (C.A.) (a third partywho agrees to indemnify another for designated legal fees is not responsible for unusual and unreasonable steps) & In re Brown, L.R. 4Eq. 464, 465 (Ch. 1867) (a trustee who directs the trust’s solicitor to perform legal services which are “not required for theadministration of the trust” must pay the unnecessary legal fees personally). I agree with Justice Agrios’ opinion in Credit Foncier TrustCo. v. Hornigold, (AB KB), 35 Alta.

L.R. 2d 341, 348 (Q.B. 1984) “that the taxing officer’s discretion to disallowcosts on an approved bill of costs should only be exercised when an item is manifestly unreasonable”. In other words, the review officershould not substitute her view of whether a service is necessary or not for that of the lawyer unless the lawyer’s decision to perform the

service is clearly indefensible. [43] A corollary of the ninth costs principle is that a client who instructs a lawyer to take steps which would not normally beundertaken is responsible for the costs associated with extraordinary measures.[22] Lord Romilly, Master of the Rolls, in In re Brown,L.R. 4 Eq. 464, 465 (Ch. 1867), illustrates the principle with this example: Suppose ... a client ... says to the solicitor, “I wish you would ... procure for me, copies of such and such deeds, and I want to have themfully explained to me, and I come to you for that purpose”.

The solicitor tells him, “You can have them if you wish, but they are not at allwanted, they are of no species of use”. The client says “Never mind, I require it to be done”. The solicitor says, “If you wish it, you shallhave it”. When the bill is taxed, and that fact is stated, the client cannot complain. He would be told, “You ordered it to be done, youwere told it was useless, and you must pay for it”. See also Magee v. Board of Trustees of Roman Catholic Separate Schools for City of Ottawa, (ON SC), 32 D.L.R. (2d)162, 165 (Ont.

H.C. 1962) (“if the client instructs the solicitor to do certain things or take certain action, which is unnecessary for theproper presentation of the case, the client is liable to pay, provided the solicitor has properly safeguarded himself with full and fairadvice”); Goodwin v. Storrar, [1947] 1 K.B. 457, 458 (1946) (“if a client authorizes his solicitor to incur an unusual or unnecessaryexpense it is only right that he should reimburse his own solicitor for it”) & J.

Cameron, The Principles of the Law of Costs 222 (1901)(a client must pay for legal services unnecessarily taken “where the same were taken by the desire of the client after being informed bythe solicitor that [they] … were unnecessary and not calculated to advance the interests of the client”.

A prudent lawyer will insure thatinstructions to this effect are reduced to writing and acknowledge in writing by the client to be his precise instructions. [44] The tenth costs principle is that the court has an overriding obligation to ensure that those who are obliged to pay for legalservices are treated reasonably, taking into account all the circumstances. This is an important function in all cases but particularly sowhen the person who may be liable to pay a lawyer’s charges does not select the lawyer.

Most indemnitor’s freely agreed to do businesswith the indemnitee, but did not select the indemnitee’s legal counsel. In Central Mortgage Housing and Corp. v. Conaty, (AB CA), 61 D.L.R. (2d) 97, 105 (Alta. Sup. Ct. App. Div. 1967), Justice Allen held that “fair and reasonable solicitor-and-clientcosts [are in order] where the mortgage authorizes this”. This principle is captured in rule 10.9 of the Alberta Rules of Court which statesthat “the reasonableness of a lawyer’s charges are subject to review by a review officer in accordance with these rules, despite any agreement to the contrary”.[23] F.

Horne, Cordery’s Law Relating to Solicitors 195 (8th ed. 1988) (“Parliament, ever watchful of theinterests of the citizen has laid down that … the client shall have the right to ask that the fairness and accuracy of the amount chargedshould be subject of adjudication”); Peddle v. Toller, 162 Eng. Rep. 1160, 1161 (Prerogative Ct. 1830) (“This Court, like all otherCourts, has considerable authority over its own practitioners and officers … which they are bound to exercise for the protection of theirsuitors against imposition and extortion”); Neuman v. Payne, 29 Eng.

Rep. 930 (Ch. 1793) (“All courts will protect their suitors”) &Balme v. Paver, 37 Eng. Rep. 866, 867 (Ch. 1821) (“The Court will not permit a party to say that the suit shall not be put an end to,unless the other agrees not to tax the bill of the solicitor”). An unsophisticated client may expect that the court will exercise its protectivefunction with more vigor than will be the case if the client is a regular consumer of legal services and familiar with the issues which arisein the delivery of legal services.

This is because a sophisticated client has the necessary skills to protect its own interests whentransacting professional business with lawyers. [45] To ensure that review and assessment officers and the Court have access to accurate market information about foreclosurepractices which is needed to implement the tenth principle,[24] I recommend that the Canadian Bar Association annually prepare adocument which discloses the fees, disbursements and charges lawyers who have foreclosure practices[25] charge and provide it toreview and assessment officers.[26] The Canadian Bar Association could conduct a survey and collect on an anonymous basis relevantdata about historical market conditions.

Without the active involvement of the Canadian Bar Association in this process, there is aconsiderable risk that neither review and assessment officers nor the Court will have access to reliable and necessary market information.As the Admiralty court noted in The Kestrel, 16 L.T.R. 72, 73 (1867), a review officer cannot implement the tenth principle without aworking knowledge of the practice area. [46] A person who contests a lawyer’s fees because they relate to services which did not increase the likelihood the purposestipulated under the specified conditions set out in the indemnification agreement would be achieved or were unnecessary or too highmust state this position at the outset of the hearing.

The lawyer bears the burden of persuading the review officer that the impugned legalservices increased the likelihood the purpose of the retainer would be achieved and were necessary and reasonable. [47] The indemnitee must provide the indemnitor with a statement of legal services in sufficient detail to give the indemnitorenough information to allow him to identify those legal services for which he is obliged to indemnify the claimant. C.

The Review Officer Failed To Take into Account the General Principles Governing Costs and Committed an Error ofLaw [48] The review officer breached several of the general principles governing costs. [49] First, he did not comply with the first costs principle.[27] He failed to recognize or give effect to the Court of Queen’s Benchorder entitling the Alberta Treasury Branches to its costs on “a solicitor and own client basis”. In doing so, the Court exercised itsjurisdiction under s. 12 of the Court of Queen’s Bench Act and rule 10.31(1) of the Alberta Rules of Court.

It determined that thedefendants must fully indemnify Alberta Treasury Branches for the sums it paid its lawyers to protect its security interests. This is not unexpected. In Canada Deposit Insurance Corp. v. Canadian Commercial Bank, 1989 ABCA 150 , 61 D.L.R. (4th) 161, 170(Alta. C.A. 1989), Chief Justice Laycraft observed that “[s]olicitor-client costs … have frequently been ordered in Alberta foreclosureactions, as a matter of course, in accordance with a contract between the parties”. [50] Second, the review officer did not comply with the third principle.

He did not make his assessment in a principled manner. [51] Instead he did what he understood the masters told him to do: “[The Masters] basically told the hearing officers that forstraightforward foreclosures, from beginning to end, you would expect to allot fees in the range from $2800 to $3200”.

[52] The review officer failed to assess the two matters before him on their merits. This omission constitutes a legal error. Idiscussed this issue in the context of an administrative law fact pattern: A statutory delegate who has a discretion to make a decision must consider the merits of the applicant’s case. An individual assessmentis mandated. The statutory delegate cannot ignore this legislative direction and allow a rigid, arbitrary and inflexible policy to dictate theresult. A statutory delegate who fails to make a merit-based decision disregards the will of the legislature and acts unlawfully. ...

The indisputable obligation administrative law principles impose on a statutory delegate who must exercise her discretion to assess eachcase on its own merits does not deprive an institution of the right to craft policies and practices. These documents have a legitimate roleto play in sophisticated statutory schemes which encounter the same issues frequently. The law and common sense are not strangers. A statutory delegate may announce that a discernible pattern emerges from a review ofprior responses to predictable problems. ...

As well, administrators may publish the results of internal assessments of the relativeimportance of competing assessments in predictable fact patterns. J.W. v.

Alberta, 2013 ABQB 212, ¶¶ 35, 36 & 37. [53] I am satisfied that the review officer erred in principle in choosing to follow what he understood was a direction from themasters to determine that a narrow band of legal fees was reasonable and ignoring the general principles governing court-ordered costs. [54] Third, he did not heed the seventh principle and conduct the inquiry suitable when a mortgagor has agreed to indemnify amortgagee for the legal services the mortgagee incurred to protect its secured interests.

The review officer must study the loan documentsand identify the legal services which are indemnified. [55] Fourth, the review officer did not ask whether Alberta Treasury Branches seeks indemnification for any step undertaken by itslegal counsel which did not increase the likelihood the lender’s security interest would be protected. Re Solicitors, (ONSC), [1972] 3 O.R. 433, 436 (Sup. Ct. Taxing Office) & AGF Trust Co. v. Soos, 2012 ABQB 747, ¶ 13 (Master). [56] Fifth, the review officer did not ask if the lender seeks indemnification for any costs associated with, as Justice Denningdescribed it in Goodwin v.

Storrar, [1947] 1 K.B. 457, 458 (1946), “any unusual or unnecessary expense”. To answer this question, thereview officer must determine whether a challenged service is clearly unnecessary. [57] If the review officer had asked these questions and concluded that Alberta Treasury Branches demanded to be made whole foronly those legal steps which increased the likelihood its security interests would be protected and none that were clearly unnecessary, hewould then have had to tackle the issue presented by the tenth principle.

Are the fees, disbursements and charges sought by theindemnitee reasonable in all the circumstances? Is it necessary to reduce the indemnification amount to ensure that the borrowers aretreated reasonably. One of the most important considerations is the borrower’s promise to indemnify fully the lender for amounts paid toits lawyers to protect its secured interests. D. Another Review Officer Must Determine What Fee Is Reasonable [58] Rule 10.27(1)(

c) of the Alberta Rules of Court allows this Court to “revoke all or part of the decision and refer the matter backto another review officer”. I choose to revoke all of the decision and direct another review officer to hear the cases on their merits. TheAlberta Rules of Court assign primary responsibility for adjudging the reasonableness of legal fees to review officers. By directing that areview officer must revisit the issue of what reasonable charges are in these two files, I am acting in accordance with legislative will.Harelkin v.

University of Regina, (SCC), [1979] 2 S.C.R. 561, 596 (“[The courts should] exercise a discretion in such away as to implement the general intent of the Legislature”). [59] I revoke the two decisions the subject of the appeals and refer the matters to another review officer. The review officer mustmake an individual assessment in accordance with the principles set out in this decision. VII. Conclusion [60] The appeals are allowed. Heard on October 21, 2013. Dated at Edmonton, Alberta on December 20, 2013.

Thomas W. Wakeling Justice of the Court of Queen’s Bench of Alberta Appearances: Wesley M. Pedruski, QC Reynolds Mirth Richards & Farmer LLP for the Appellant Christopher E. Forgues for the Respondents _______________________________________________________ Corrigendum of the Reasons for of The Honourable Mr. Justice Thomas W.

Wakeling _______________________________________________________ Please note the citation line should read: Alberta Treasury Branches v. 1401057 Alberta Ltd. (Katch 22), 2013 ABQB 748 _______________________________________________________ Corrigendum of the Reasons for of The Honourable Mr. Justice Thomas W. Wakeling _______________________________________________________ Changes were made to paragraphs [18]. There is a new paragraph [19] and all paragraphs thereafter have been renumbered. Changes have been made to footnotes 5, 6, 7, 16.

Changes were to paragraphs [42], [43] and [44] which are now paragraphs [43], [44] and [45]. The word Masters was changed to masters throughout.