AMEC Foster Wheeler Americas Limited v Attila Dogan Construction and Installation Co Inc, 2016 ABQB 305

Court of Queen ’ s Bench of Alberta Citation: AMEC Foster Wheeler Americas Limited v Attila Dogan Construction and Installation Co Inc , 2016 ABQB 305 Date: 20160527 Docket: 0701 09436 Registry: Calgary Between: AMEC Foster Wheeler Americas Limited Applicant - and - Attila Dogan Construction and Installation Co. Inc. Respondent _______________________________________________________ Oral Reasons for Judgment of the Honourable Chief Justice Neil Wittmann _______________________________________________________ Introduction [ 1 ] AMEC Foster Wheeler Americas Limited (“AMEC”) brought an application to strike or dismiss the Amended Statement of

Claim of Attila Dogan Construction and Installation Co. Inc. (“AD”) for failure to comply with a Court Order requiring AD to renew or replace a standby letter of credit, 556 LOC, in the sum of $74,972.23 in the event it was drawn down by AMEC to satisfy Costs Awards earlier made in this litigation. [ 2 ] AD is a foreign corporation based in Turkey with no assets in Alberta. The original Order for Security for Costs, on the application of AMEC, was made by me March 17th, 2011: Attila Dogan Construction v AMEC Americas Limited , 2011 ABQB 175 , which fixed the Security for Costs $1,600,000.00.

An additional $360,000.00 Security for Costs was ordered by me pursuant to an Order made April 23rd, 2013: Attila Dogan Construction and Installation Co Inc v AMEC Americas Limited , 2013 ABQB 240 . In that decision, AMEC was given leave to adjust the Security for Costs to the end of questioning and to apply for Security for Costs for the trial. A further Security for Costs Order was made by me November 29th, 2013 ordering AD to post further security for costs in the sum of $74,972.23.

The application to adjust Security for Costs to the end of questioning and for the trial is set for June 22nd, 2016. [ 3 ] AD has, throughout this litigation changed counsel numerous times and has asked the Court for extensions or adjournments and received many. Much of this background is detailed in my decision Attila Dogan Construction and Installation Co v AMEC Americas Limited , 2015 ABQB 120 at paragraphs 6 through 22. [ 4 ] The Costs Awards totalled $66,666.62 and 556 LOC was drawn down to pay those Costs Awards on or about March 21 st , 2016.

Pursuant to my Order of March 29 th , 2016 AD was required to renew or replace the 556 LOC no later than March 30 th , 2016 in the event it was drawn upon to satisfy the Costs Awards. [ 5 ] In addition, two other letters of credit, one in the amount of $1,600,000.00, 558 LOC, and another in the amount of $360,000.00, 557 LOC, were required to be renewed no later than March 28 th , 2016. The 558 LOC and the 557 LOC were renewed on March 30 th , 2016 but the 556 LOC has not been renewed, replenished or replaced to date.

As the result of AD’s default and breach of my Order of March 29 th , 2016, AMEC was entitled to direct the Clerk of the Court to demand full payment under all letters of credit if the 556 LOC was not renewed by 4:00 pm on March 31 st , 2016. On April 4 th , 2016, the Clerk of the Court demanded that the Bank of Montreal (“BMO”) pay into Court the amount secured by the 558 LOC ($1,600,000.00) and the 557 LOC ($360,000.00) and any amounts remaining under the 556 LOC.

There is paid into Court now the sum of $1,968,305.61. [ 6 ] Accordingly, AMEC has brought this application to strike or dismiss AD’s claim or in the alternative, to cite AD in contempt for failing to renew, replenish or replace the 556 LOC with appropriate sanctions. Additional Background Facts [ 7 ] On April 5 th , 2016, AD’s counsel, Gilbert’s LLP, served AD with a Notice of Withdrawal of Lawyer of Record, unfiled, by sending it to Kaan Dogan at his email address. AMEC’s application commenced April 14 th , 2016 and AD’s counsel, Gilbert’s LLP, Mr. Diskin, appeared in front of me.

In addition, a written brief in opposition to AMEC’s application was sent to me by AD’s counsel. On April 14 th , 2016, I did not hear the merits of the application because I had not received the materials in the form of written briefs and affidavits in time to properly prepare for it. I also suggested that perhaps AMEC’s application might become moot if AD were to purge its alleged contempt by renewing LOC 556 prior to the return date of April 27 th , 2016 at 10:00 o’clock in the morning which date would be pre-emptory on AD.

It was made clear that the application would proceed on that date in the absence of counsel for AD, if necessary. [ 8 ] On April 27 th , 2016, I commenced hearing the application on submissions by AMEC. Kaan Dogan appeared by telephone from Turkey.

He was advised he was not permitted to speak on behalf of AD because existing Alberta authority did not permit a representative of a large corporation, not a member of the Law Society of Alberta or its equivalent, according to the Law Society reciprocity rules, to speak on behalf of a corporation: 908077 Alberta Ltd v 1313608 Alberta Ltd 2015 ABQB 108 . [ 9 ] Prior to the commencement of today’s hearing, Kaan Dogan telephoned my Executive Legal Assistant, Christine Urquhart, to inquire whether he should appear by telephone from Turkey at this morning’s hearing in light of the fact that he understood he could not speak on behalf of AD.

I am advised by Ms. Urquhart that she informed Mr. Dogan that it was entirely up to him whether to appear by telephone or not and that he was entitled to appear at this hearing. I am informed by Ms. Urquhart that Mr.

Dogan has declined to appear by telephone this morning but of course wishes to be served with any Order made by the Court at his email address provided on the Notice of Withdrawal of Lawyer of Record, namely kaan@adogan.com.tr. [ 10 ] As the application proceeded on April 27 th , 2016, I noted that I did not have materials in front of me indicating how much the calculated costs were to the end of questioning. The material in front of me as to the amount of the default on 556 LOC, namely $66,666.62 was not a large proportion of the total amount of the Security for Costs ordered.

The application was therefore adjourned until May 27 th , 2016 in order that the Court might receive further materials. [ 11 ] Further materials were filed by AMEC by the Affidavits of Jennifer Sargeant. Those further materials included a Draft Bill of Costs up to and including the end of the questioning stage of the litigation. The taxable fees, pursuant to Column 5 of

Schedule C of the Alberta Rules of Court (“ ARC ”) amounted to $288,000.00 and another column was provided in the Affidavits, Triple Column 5 in the sum of $864,000.00. The Court notes the double Column 5 would amount to taxable fees of $576,000.00. The disbursements subject to GST claimed for the same time period that is, until the end of questioning, amounted to $1,594,128.14, according to the Draft Bill of Costs. Non-taxable disbursements amount to $104,111.65. Total GST is calculated at $122,906.41. The total Draft Bill of Costs utilizing Triple Column 5 is $2,685,146.20.

The purpose of my request was to ascertain whether the amount of Security for Costs posted to the end of questioning would be sufficient without the addition of another $66,666.62, in which case it might seem a disproportionate sanction to strike or dismiss a claim for failure to comply with a Court Order involving the maintenance of security for costs.

Positions of the Parties A. AMEC AMEC has referred to ARC 4.23(1)(

d) in submitting that a Security for Costs Order unless otherwise stated, shall indicate that if the security is not provided, all or part of an action may be dismissed without further Order or a claim or defence may be struck. The simple argument of AMEC in this regard is that the 556 LOC was not replaced or replenished in accordance with a Court order and therefore all or part of the action ought to be dismissed without further order. [ 12 ] On the contempt issue, AMEC says that the failure to renew, replenish or replace the 556 LOC in the face of the March 29 th Order constitutes civil contempt of court.

It cites Point of the Bow Development Ltd v William Kelly & Sons Plumbing Contractors Ltd. , 2006 ABQB 775 at paragraph 24 for the proposition that delay is the second worst problem in the judicial system after expense. AMEC detailed a long pattern of delay by AD.

AMEC submits the purpose of the contempt powers of the Court, namely that the justice system cannot function if Court Orders can be ignored or disobeyed without reasonable excuse and without penalties for violation: Koerner v Capital Health Authority , 2011 ABQB 191 at paragraph 42 . [ 13 ] AMEC argues that the central idea is the Courts have a right to protect the dignity of their own proceedings and are entitled to discipline conduct that tarnishes, undermines or impedes the Court’s role in society as the principal administrator of justice as well as the inherent power of the Court.

ARC 10.52(3) references the civil contempt power of the Court in terms of non-compliance with a Court order “without reasonable excuse” other than an order for the payment of money.

In Dickie v Dickie, 2007 SCC 8 , it was held that an order to secure a payment, by providing an irrevocable letter of credit, does not constitute an order for the payment of money. [ 14 ] AMEC argues that it is clear that AD failed to comply with an existing Order of the Court to replace or replenish the 556 LOC pursuant to the March 29 th Order; that AD knew of this Order because it was agreed to as to form and content by its legal counsel. AMEC says the only issue is whether AD had a reasonable excuse for not complying. [ 15 ] With respect to appropriate sanctions, AMEC refers to ARC 10.53(1)(

d) which includes the remedies of the Court of staying an action or dismissing an action or striking a claim. AMEC points out that AD has not tendered a formal apology to the Court; that the breach was part of a pattern of ongoing conduct of AD; that it was done with full knowledge and understanding that a breach of a Court order was involved and that AD kept insisting through its legal counsel that it had the ability to renew, replenish or replace the 556 LOC, but did not.

AMEC therefore requests that AD be held in civil contempt that the claim be struck or dismissed, or, in the alternative, that AD be directed to renew, replenish or replace the 556 LOC within 5 days of the date of an Order of this Court. B. AD [ 16 ] As indicated, AD’s counsel submitted a brief in opposition to AMEC’s application prior to ceasing to act. AD’s counsel submits that AMEC has not met the test to have AD held in civil contempt and that AD’s Amended Statement of Claim should not be struck. [ 17 ] The first point made by AD is that the purpose of civil contempt is coercion rather than punishment.

That is, to ensure compliance with Court orders to uphold the authority of the Court. Citing Schitthelm v Kelemen , 2013 ABQB 42 at paragraph 47 , AD submits that the standard of proof, required in order to cite someone in civil contempt, is beyond a reasonable doubt. AD admits it was provided with sufficient notice of the March 29 th Order and that it failed to comply with it, but asserts that AD did not intentionally, willfully or recklessly fail to renew, replenish or replace the 556 LOC as required by the March 29 th Order.

AD’s position resolves down to the point where AD says that it did not act intentionally, that it was not able to comply with the March 29 th Order but “for reasons out of its control” was unable to do so. [ 18 ] In support, the Affidavit of Kaan Dogan affirmed before a Notary Public in the Republic of Turkey on April 13 th , 2016, is presented.

In this Affidavit, Kaan Dogan deposes to losses in the sum of USD $182,763,000.00 in a dispute with the Sultanate of Oman while referring to a previous Affidavit in these proceedings and attached as Exhibit A, which Affidavit was affirmed March 28 th , 2015 which was filed in support of a Stay of the Judgment on the Counterclaim.

The rest of the Affidavit deals with the financial inability of AD to liquidate any of its assets, the decline of the value of the Turkish Lira relative to the US Dollar and further financial difficulties. [ 19 ] The Affidavit also deposes that Kaan Dogan spoke with his bank during the week of March 7 th , 2016 regarding the need to renew, replenish or replace the Letters of Credit and was assured that all necessary instructions were sent to the Bank of Montreal (BMO).

Kaan Dogan deposes that after he told his bank of the draw down of $66,666.62 on 556 LOC, he was assured that it would be topped up to the full amount of $74,972.23 on March 21 st , 2016. Kaan Dogan indicates that his bank failed to send the appropriate instructions to renew the 556 LOC and that he has since been informed that as the result of the draw down, AD exceeded its approved limit and would therefore require “further Committee approval” to extend AD’s limit.

Kaan Dogan then expresses his regret that AD has not been able to replenish the draw down amount of $66,666.62. [ 20 ] It is further the position of AD that AMEC has suffered no prejudice as the result of the breach of this Order because the 556 LOC accounts for only 3.7% percent of the total Security for Costs posted by AD and indicates that, as the result of the

summary determination on the counterclaim, the issues may well have been narrowed and any Security for Costs for the trial may well be too high. Analysis

[ 21 ] The Court made the comment that the April 27 th application may not be necessary if 556 LOC were to be replenished, or restored prior to the date for the hearing. It was not. At the April 27 th hearing, I heard full argument from counsel for AMEC and Kaan Dogan, the President of AD, was on the telephone from Turkey listening to the application. It was explained to Mr. Dogan that he needed local counsel to speak on behalf of his corporation and that he would not be permitted to do so. He indicated that he understood.

The written brief of AD’s prior counsel, Gilbert’s LLP, as indicated above, suggested that there was no prejudice because the missing 556 LOC was really a small part of the total amount posted as security by way of other LOCs.

At the conclusion of the hearing on April 27 th , 2016, I put forward this argument to counsel for AMEC and counsel for AMEC said that he would be happy in short order to put before me a draft Bill of Costs to the conclusion of questioning and indicated that in fact on June 22 nd , 2016 the application that AMEC would be making would be to increase the amount necessary for Security for Costs to the end of questioning by $250,000.00. [ 22 ] That new evidence came before me via 2 Affidavits of Jennifer Sargeant, referred to above. It contained the draft Bill of Costs to the end of questioning.

As indicated, one of the significant areas in the Draft Bill of Costs is what column or multiple thereof would be selected by the Court to project the party and party costs for the purpose of Security for Costs. I note that in the first decision of this Court requiring AD to post security for costs, 2011 ABQB 175 , I said this at paragraph 27: In this case, due to the complexity of the action, the multitude of issues and weighing all of the factors discussed above, I have decided to evaluate the quantum of security for party and party costs excluding disbursements based on triple Column 5.

It is appropriate, in circumstances where the claim is significant and the issues complex, to award security for costs on the basis of multiples of Column 5: Ritter v Hoag, 2003 ABQB 229 ; Tracer Industries. I see no reason to change the multiple of Column 5 for purposes of this decision. Thus, as stated earlier, the uncontradicted evidence is a Draft Bill of Costs pursuant to Triple Column 5 totalling $2,685,146.20. Whether all of those items are truly properly assessed pursuant to Triple Column 5 of

Schedule C of the ARC does not have to be decided by me for the purposes of this application. But what is notable is that there is a prima facie case that the assessment of costs pursuant to Triple Column 5 of

Schedule C, to the end of questioning, will be increased beyond $1,968,000.00 by $717,000.00 in round numbers. This calculation makes the 556 LOC deficiency much more meaningful in the context. It demonstrates that AMEC has been prejudiced by the failure of AD to renew, replace or replenish the 556 LOC. [ 23 ] It is a matter of some concern to the Court that at no time did AD proffer an apology for not complying with the March 29 th Order.

The Court on April 14 th , 2016 stated on the record that if AD were to renew, replenish or replace the 556 LOC prior to April 27 th , 2016, the then next scheduled hearing date, the application would become moot because AD would have purged its contempt, if indeed contempt were found. That did not happen. It has not happened yet. [ 24 ] It is the Court’s view that a reasonable excuse has not been made out in the context of this case. Even accepting the Affidavit of Kaan Dogan referred to above at its face value, there has been plenty of time since April 27 th for AD to renew, or replenish or replace 556 LOC.

In the context of what is at stake, it seems incongruous to the Court that a $66,666.62 Letter of Credit cannot be obtained by AD. This is telling. The tell is that AD is unable or unwilling in the context to comply with the March 29 th Order. [ 25 ] I therefore find AD in contempt of Court and will impose a sanction. I choose not to proceed pursuant to ARC 4.23(1)(d).

I choose instead to grant the relief AMEC asks for in the alternative and that is, to dismiss AD’s Amended Statement of Claim against AMEC in its entirety unless, within 5 business days of today, AD replaces or renews 556 LOC to the extent of $66,666,62. For greater certainty, the deadline is by the close of business on June 3 rd , 2016 at 4:30 p.m. Mountain Daylight Time. [ 26 ] In light of Kaan Dogan’s decision not to appear today, time will begin to run upon AD being served with the Order made today.

Counsel for AMEC is directed to prepare the Order and compliance with ARC 9.2(2) is dispensed with. [ 27 ] Costs of this application will be assessed in favour of AMEC against AD pursuant to Triple Column 5 of

Schedule C to the ARC . Heard on the 14 th , 27 th day of April and 27 th day of May, 2016. Dated at Calgary, Alberta this 27 th day of May, 2016. Neil Wittmann C.J.C.Q.B.A. Appearances:

David Tupper Ryan Zahara for the Applicant Matthew Diskin for the Respondent (April 14 th , 2016 only)