Pillar Resource Services Inc v Primewest Energy Inc, 2016 ABQB 120

Court of Queen ’ s Bench of Alberta Citation: Pillar Resource Services Inc v Primewest Energy Inc, 2016 ABQB 120 Date: 20160309 Docket: 0401 17601 Registry: Calgary Between: Pillar Resource Services Inc. Plaintiff/Defendant by Counterclaim - and - Primewest Energy Inc. and Primewest Gas Corp. Defendants/Plaintiffs by Counterclaim - and - Equinox Engineering Ltd. Third Party by Counterclaim Corrected judgment: A corrigendum was issued on March 24, 2016; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of the

Honourable Madam Justice B.E. Romaine _______________________________________________________ [1] Pillar Resource Services Ltd., the successful party in this litigation, seeks solicitor-client costs from the DefendantsPrimewest Energy Inc. and Primewest Gas Corp. (collectively, “Primewest”), subject to assessment, and disbursements, including expertfees and all expenses arising from having Messrs. Guenther and Milliner give evidence by video conference. [2] The issue is whether this is one of the “rare and exceptional” cases where an award of solicitor-client costs is appropriate.Pillar submits that it is, on the basis that Primewest:

a) engaged in blameworth conduct during the trial;

b) unduly prolonged the trial;

c) was guilty of misconduct prior to the litigation;

d) alleged fraud by Pillar which it failed to prove; and

e) that justice would be served by such an award. [3] These are the kinds of factors that have led courts to order indemnification costs: Jackson v Trimac Industries Ltd., (AB KB), [1993] 138 A.R. 161 at paras 11-12. [4] The specific allegations under each of these headings are as follows: A. Blameworthy conduct during trial [5] Pillar submits that Primewest’s witnesses provided misleading and disingenuous testimony in an attempt to buttress anuntenable theory of the case. [6] It is true that in my judgment, I found the testimony of Primewest’s main witness, Mr. Miller, not to be credible.

This lack ofcredibility has already had its effect in the trial findings of fact in Pillar’s favour. It should not also serve as a rationale for a more severecosts award. [7] Pillar also submits that the Primewest’s overall litigation strategy merits a special award of costs. [8] Pillar is quite correct that Primewest’s strategy was to attempt to negotiate down Pillar’s bills because the project in issue didnot come within Primewest’s budget, despite the fact that Pillar performed the work it was asked to perform.

When Primewest’s initialstrategy failed, it required Pillar to prove its entire case at trial, including facts that turned out not to be contested or in issue. [9] While a litigant is entitled to require the opposing party to prove its case, its failure to concede uncontested facts may be afactor that warrants an increased award of costs for the party required to adduce evidence that could have been avoided by reasonable co-operation. [10] Pillar also refers to Primewest’s attempt to improperly introduce appendices to its written argument that should properly havebeen evidence during the trial.

Despite Primewest’s attempt to reargue the nature of these appendices in its costs submission, Pillar iscorrect that these appendices included evidence improperly sought to be entered after the trial was over. I did not rely on the appendicesin making my decision. Thus, the attempt was thwarted at that stage, and the process was not subverted. B. Prolonged trial [11] As noted previously, given Primewest’s litigation strategy, Pillar was required to prove every element of its claim. Thisprolonged the trial and required Pillar to submit evidence on issues that could and should have been admitted.

This was obvious whenPrimewest led little or no evidence in response on issues such as whether Pillar had performed the work it had been asked to perform,and weak or speculative evidence on issues of quality or necessity of work. [12] Again, Primewest was entitled to take this position. This does not mean, however, tha it does not bear the risk of adverse costsconsequences as a result. [13] Primewest characterizes its theory of the case as a “bona fide” defence.

Even if was, this theory did not require Pillar to provefacts that were not in issue, even under this theory. [14] Primewest submits in its costs brief that Pillar destroyed material evidence. This is patently incorrect. As I indicated in thevoir dire decision, there was no deliberate spoliation of evidence.

The unavailable packing slips in question would be hearsay evidence tothe same extent as the third party invoices that were submitted as evidence, and to require direct evidence on these packing slips would,as I said in my ruling, “complicate this kind of litigation beyond reason.” This was not misconduct by Pillar. C. Pre-trial misconduct

[15] The issue here is Mr. Miller’s conduct during project post-completion meetings. As indicated in my reasons, his testimonyabout the purpose of those meeting was disingenuous and was not credible. It was clear that Mr. Miller was attempting to negotiate downPillar’s invoices as a result of the failure of the project and high costs over budget.

As a result, he encouraged and required Pillar tojustify its accounts on the specious excuse that he was trying to understand the charges. [16] This conduct, can be characterized as sharp business practice at a minimum: an attempt to grind down or exhaust a creditorinto giving up or negotiating a lower settlement. [17] This is the kind of conduct that can be taken into account in assessing costs. D. Unproven allegations of fraud [18] As noted by Pillar, Pillar’sAmended Statement of Defence alleges that Pillar intentionally inflated its costs and claimed adistorted mark-up.

This is an allegation of fraud, even if the precise term is not used. The allegation was not proved at trial. In fact,Primewest admits that it did not argue the issue at trial. Deterrence of such unfounded allegations is a reason to award solicitor-clientcosts, even if the allegations of fraud are later withdrawn, or, as in this case, not pursued: Goulin v Goulin, [1995] OJ No. 311 at paras13-17; Toronto-Dominion Bank v Leigh Instruments Ltd., [1998] O.J. No. 4221 at para 18. E. Justice should be served [19] Mr. Miller’s post-completion conduct also falls under this heading.

While Primewest’s strategy of misleading Pillar intofurther efforts to justify their invoices in order to discourage it into a settlement or prolong the day of reckoning as long as possible maynot be an uncommon tactic, the issue is whether it tips the balance of the general rule against indemnity costs. [20] McDonald J. in Reese v Alberta (AB KB), [1993] 1 W.W.R. 450(ABQB) at para 8 explains the generalrule as follows: The Canadian practice reflects an attempt to balance two conflicting interests.

On the one hand, it is argued that if a party is successfuland there are no circumstances constituting blameworthiness in the conduct of the litigation by that party, it is unfair to require thesuccessful party to bear any costs incurred by his counsel in prosecuting or defending the action. On the other hand, it is argued that ifthe unsuccessful party is required to bear all the costs of the successful party, citizens will be unduly hesitant to sue to assert their rights(even valid ones) or to defend their rights when sued.

The partial indemnity practice as it exists in Canada is a compromise intended togive some scope in practice for each of the conflicting policy considerations. [21] The policy compromise referred to must surely presume good faith conduct during the litigation by all parties. As noted byPillar, the objective of deterrence of ethically suspect conduct must also be considered.

A business model that discourages creditors fromasserting their justifiable rights by delay, misleading negotiation tactics and lack of cooperation in the trial process should be deterred.The costs process is an appropriate place for this deterrence. [22] I find that the following conduct of Primewest, when viewed as a whole, warrants the exceptional relief of an award ofsolicitor - client costs, subject to assessment and disbursements, including expert fees and the expenses of having Messrs. Guenther andMilliner give evidence.

a) Primewest’s misleading requests for further information from Pillar during post-completion negotation, when clarification was notreally an issue, and its delays in such negotiation;

b) Primewest’s attempt to introduce additional evidence in its written argument after trial;

c) the additional trial time necessitated by the Primewest’s’ refusal to admit facts that ultimately were not in issue;

d) the unproven allegations of fraud that continued until trial, but were not addressed by Primewest at trial. [23] The defendants are jointly and severally liable for these costs. [24] I am persuaded by these factors taken together that this is a case where justice can only be done by a completeindemnification of the successful plaintiff’s costs. In the present climate of expensive litigation and scarce judicial resources,Primewest’s efforts to delay the trial and prolong its length must be denounced and deterred. [25] The third party, Equinox, is in an unusual position.

It was joined in the litigation by reason of Primewest’s counterclaim. [26] When the counter-claim was dismissed, the third party notice became moot.

Equinox submits that it was forced to participatein the litigation given the risk of the counterclaim succeeding (albeit in a limited way pursuant to a pre-trial order that precluded Equinoxfrom leading evidence, although it was permitted to cross-examine witnesses and present argument). [27] Equinox admits that the counterclaim was “unusual and, arguably, without any real prospect of being the basis for the flowthrough of monetary liability against Equinox.” However, it submits that it is entitled to costs, notwithstanding its election to file aDemand of Notice rather than a defence.

[ 28 ] I find that Equinox is entitled to taxable costs under column 4 of

Schedule C against Primewest, as it was Primewest’s weak counterclaim that led to the necessity of Equinox’s involvement in the trial. Again, the Defendants are jointly and severally liable for costs. Dated at the City of Calgary, Alberta this 9 th day of March, 2016. B.E. Romaine J.C.Q.B.A. Appearances: John Gruber, MacPherson Leslie & Tyerman LLP Andrew E. Stead, McMillan LLP for the Plaintiff Timothy C. Platnich, Mohamed A.

Amery, Caron & Partners LLP for the Defendants Todd Kathol, Field Law for the Third Party _______________________________________________________ Corrigendum of the Reasons for of The Honourable Madam Justice B.E. Romaine _______________________________________________________ Under the heading of Appearances: the name of counsel for the Defendants has been corrected to read Mohamed A. Amery