Boreta Estate (Re), 2014 ABQB 759

Court of Queen ’ s Bench of Alberta Citation: Boreta Estate (Re), 2014 ABQB 759 Date: 20141210 Docket: 0601 01120 Registry: Calgary Between: The Estate of Voss Boreta Plaintiff - and - Edd McRory Defendant _______________________________________________________ Reasons for Judgment Re Costs of the Honourable Mr. Justice R.J. Hall _______________________________________________________ [ 1 ] The plaintiff sued a number of defendants, maintaining that he suffered damages as a result of their actions regarding his shareholdings in Primrose Drilling Ventures Ltd. (Primrose).

The plaintiff discontinued against defendant Kent, settled with defendant Itzek and then settled with defendants Primrose, John Boreta (the plaintiff’s brother) 1280417 Alberta Ltd. and Hamid Jafar a month before the commencement of trial. The only remaining defendant was Mr. Edd McRory, a barrister and solicitor who had acted as the

lawyer for Primrose throughout the relevant period. The claim against Mr. McRory proceeded to trial. I granted judgment to the Plaintiffagainst Mr. McRory for breach of his fiduciary duties as a trustee of the Plaintiff’s shares, and for oppression under s.242 of the AlbertaBusiness Corporation Act. [2] At trial the plaintiff acknowledged having been compensated by settlement agreement for the value of 49% of the shares ofPrimrose; but sued McRory for the value of 1% of such shares, plus the value of the loss of his alleged control position, between 49%ownership and 50% ownership.

I granted damages for the former, but not for the latter. [3] The plaintiff now seeks to have costs assessed against the defendant, and seeks to have those costs assessed on a solicitor-client basis. The plaintiff’s solicitor- client costs of this litigation amounted to $3.2 million before the trial began. Thereafter theplaintiff’s counsel acted on a contingency basis. [4] Both parties agree the plaintiff is entitled to costs from the defendant. The defendant maintains that such costs should beawarded on a party-party basis in accordance with

Schedule C of the Rules of Court. [5] Both parties agree that costs are normally assessed on a party party basis. However, the plaintiff maintains that, where thebreach is by a trustee, or is in the nature of oppression, different considerations arise. He refers the court to 218125 Investments Ltd. vPatel et al [1995] AJ No 1222, where Rooke, J., as he then was, commented (para 71): ...in the context of a finding of oppression while costs are always in the discretion of the court...

I believe that solicitor-client costs shouldbe considered prima facie the order of the day, absent compelling circumstances. [6] Justice Rooke came to a similar conclusion in McAteer v Devoncroft Developments Ltd, 2001 ABQB 917. However thedefence counters with the decision in Envirodrive Inc. v 836442 Alberta Ltd, 2005 ABQB 807, where Slatter, J., as he then was, stated(para 17): I also do not agree with the suggestion in the McAteer v Devoncroft Developments Ltd, 2001 ABQB 917, 99 Alta L.R. (3d) 6, 307 A.R. 1(Alta Q.B.) that there is a presumption of solicitor and client costs in these cases.

Rule 605 says the presumption is

Schedule “C”. Youngv Young (SCC), [1993] 4 S.C.R. 3 (S.C.C.) says that solicitor and client costs are rare and exceptional.

Solicitor andclient costs are not always appropriate in oppression proceedings. [7] The defence also points to Polar Ice Express Inc. v Arctic Glacier Inc., 2009 ABCA 20, to say that the issue of bad conductwarranting solicitor-client costs is generally confined to bad conduct in the litigation, not pre-litigation conduct; however the Court ofAppeal did also say (para 22) that “trusts or a fiduciary relationship might be an exception to that rule”. [8] In HSBC Bank Canada v Lourenco, 2012 ABQB 648, Goss J considered the issue and determined that even a fraudulent anddishonest breach of trust in that case was not so “extreme” as to warrant solicitor and client costs. [9] In HSBC Bank Canada v 1100336 Alberta Ltd., 2012 ABQB 27, Marshall J decided that, absent misconduct during thecourse of the litigation, full indemnity costs should not be awarded.

However, in light of the conduct of the defendants he awarded costson a multiple of the appropriate column of

Schedule C. [10] I am of the view that in cases of breach of trust, breach of fiduciary duty and/or oppression, the court may order solicitor-client costs for pre-litigation conduct; but there is no presumption that such costs should be awarded. [11] Further, for such a costs remedy to be appropriate, the court must be satisfied that the pre-litigation conduct of the defendanthas been extreme and egregious. [12] So, for example, where a trustee or fiduciary breaches his duties to the plaintiff, and in doing so realizes a personal gain, hisconduct may be seen as extreme and egregious. [13] Here the defendant McRory realized no personal gain.

He relied upon the plaintiff’s brother John to instruct him, and to obtainappropriate authority from the plaintiff.

He carried out the instructions provided to him by John, who was clearly the directing mind ofPrimrose. [14] While in doing so he breached his duties to the plaintiff, both as the plaintiff’s trustee and as director of Primrose, I attributeno malice to his action, no intent to cheat or defraud the plaintiff. [15] I do not find the defendant’s conduct to be either extreme or egregious and therefore I decline to award solicitor and clientcosts. [16] It must also be noted that the vast majority of legal fees incurred by the plaintiff in this action were rendered necessarybecause of the disputes with the other defendants, most notably John Boreta and Hamid Jafar.

The plaintiff prepared an affidavit datedOctober 12, 2012, which was presented by his counsel in these costs proceedings. In that affidavit, the plaintiff laid out at length themany steps required of him and his counsel because of the resistance of those other defendants. Very little of the legal fees incurredrelated to the dispute with the defendant McRory. [17] The plaintiff settled with those defendants in what is known as a Pierringer Agreement dated March 10, 2013.

The plaintiffmust be taken to have known the extent of the legal fees incurred as a result of the lengthy and difficult fight against John Boreta andHamid Jafar, when he settled his claims against them. [18] In the Pierringer Agreement, the plaintiff acknowledged satisfaction of his claims for damage and costs against the settlingdefendants, and covenanted that he would not seek to recover from McRory any amount in excess of McRory’s several liability, whetherfor damages, costs, interest or other relief.

[ 19 ] The plaintiff acknowledges through his counsel that, as a result, he can only recover from McRory such damages and costs for which McRory is severally liable. [ 20 ] The plaintiff proposes that I should deduct such portion as is the responsibility of the Settling Defendants from the plaintiff’s solicitor-client costs and award the rest against McRory. [ 21 ] To do so would have the effect of punishing McRory for alleged litigation misconduct of the other defendants. No litigation misconduct is alleged by the plaintiff against McRory.

McRory has no several liability for solicitor-client costs incurred by the plaintiff by virtue of litigation misconduct. [ 22 ] I am therefore convinced that I should not depart from the normal assessment. Costs are assessed in Column 2 of

Schedule C of the Rules of Court. [ 23 ] Only those steps directly attributable to the litigation against McRory are recoverable against him, the plaintiff having settled in respect of the rest. [ 24 ] As to expert’s fees, I consider fees incurred before trial to have been jointly assessable against all defendants. By virtue of the terms of the Pierringer Agreement the plaintiff has been compensated for them. [ 25 ] For those experts who appeared and provided evidence at trial, I award their full trial appearance fees as a taxable disbursement against Mr. McRory. [ 26 ] Costs of this application in Column 2 of

Schedule C are awarded against the plaintiff in favor of the defendant McRory, to be set off against the costs awarded herein to the plaintiff. Heard on the 28 th day of November, 2014. Dated at the City of Calgary, Alberta this 10 th day of December, 2014 R.J. Hall J.C.Q.B.A. Appearances: Robert Thompson, Q.C. Justin Lambert Bennett Jones LLP for the plaintiff Edward Halt, Q.C. Peacock, Linder & Halt LLP for the defendant