Union Square Apartments Ltd. v Academy Contractors Inc. (Abalon Construction), 2017 ABQB 151

Court of Queen’s Bench of Alberta Citation: Union Square Apartments Ltd. v Academy Contractors Inc. (Abalon Construction) 2017 ABQB 151 Date: 20170302 Docket: 1303 06105 Registry: Edmonton Between: Union Square Apartments Ltd. Plaintiff - and - Academy Contractors Inc. (Abalon Construction), Academy Contractors Inc. operating as Abalon Construction, Randy Bylyk, Ptarmigan Engineering Ltd., Richard Imai, Ayre & Oxford Inc., Paul Jones Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.E.

Topolniski _______________________________________________________ I. Introduction [ 1 ] The Defendants, Ptarmigan Engineering Ltd and Richard Imai served a formal offer to settle under Rule 4.29 shortly after filing their Statement of Defense. Having successfully appealed a denial of their

summary dismissal motion (reported as Union Square Apartments Ltd v Academy Contractors Inc. (Abalon Construction) , 2016 ABQB 575 , [2016] AJ No 1065 (QL)), they seek double costs for all steps taken since the offer was served. [ 2 ] For the reasons that follow, I find that the offer was a ‘genuine offer’ and that Ptarmigan and Imai are entitled to double

costs for all steps taken after it was served. II. Factual Matrix [ 3 ] The facts surrounding the offer are straightforward. [ 4 ] The Plaintiff filed its Statement of Claim on April 29, 2013, claiming $1.6 million in damages. Ptarmigan and Imai filed their Statement of Defense on September 11, 2013, which was followed by the offer fifteen days later. [ 5 ] The offer provided that Ptarmigan and Imai would waive their costs incurred to date (valued at approximately $6500) in exchange for a discontinuance of the Plaintiff’s claim and all subrogated claims on a no-fault basis.

It was open for acceptance until November 26, 2013. [ 6 ] No steps were taken by either party (including exchanging affidavits of record and questioning) in the period that the offer was open for acceptance, and the Plaintiff never responded to the offer. III. Issues [ 7 ] Two issues arise: (

a) Is the offer ‘genuine’ and; (

b) If so, does the requirement to discontinue subrogated claims change the complexion of the offer? IV. Analysis A. Rule 4.29 [ 8 ] Rule 4.29 ( Alberta Rules of Court , Alta Reg 124/2010) reads in part:

(2) Subject to sub rule (4), if a defendant makes a formal offer to settle that is not accepted and a judgment or order in the action is made that is equal to or more favorable to the defendant than the offer, the defendant is entitled to costs for all steps taken in the action in relation to the action or claim after service of the offer.

(3) A defendant is entitled to double the costs provided for in sub rule (2), excluding disbursements, if: (

c) sub rule (2) applies, and; (

d) the action or claim that is the subject of the formal offer to settle is dismissed. [ 9 ] The language is similar to that found in its predecessor under the old Rules of Court, Alta Reg 390/1968 , R 174(1.1): [ 10 ] When costs are payable to the defendant under sub rule (1) and the action is dismissed entirely, those costs shall, unless for special reason, be double the amount of costs (excluding disbursements) the defendant would otherwise have recovered for all steps in relation to the defence after the service of the notice of payment or the offer. [ 11 ] Given this, cases concerning the “old” Rule 174 continue to inform the application of the “new” Rule 4.29: see e.g.

Blaze Energy Ltd v Imperial Oil Resources , 2014 ABQB 509 , [2014] AJ No 916 (QL) at para 89 [ Blaze Energy ]. [ 12 ] The Rule’s purpose is to encourage compromise and settle litigation on a fair and reasonable basis before a matter proceeds to a final resolution before the courts: Allen (Next Friend of) v Mueller , 2006 ABCA 101 , 384 AR 23 at para 12 [ Allen ]. B. Is the Offer ‘genuine’? [ 13 ] Rule 4.29(4)(

e) provides that the Rule does not apply “if in special circumstances the Court orders that this rule is not to apply”, which has been interpreted to include offers that are not genuine: Blaze Energy at para 89 ; Allen at para 13 . [ 14 ] The losing party bears the burden of showing that an offer is not genuine or that there is another “special reason” to depart from the presumptive rule: Labbee v Peters , 2000 ABCA 176 , 261 AR 141 at para 15 [ Labbee ]. [ 15 ] For an offer to be ‘genuine’, it cannot have been made with the expectation that it would never be accepted by the other party, nor solely to invoke the double costs provision as a “no-risk” litigation tactic: Kerr v Kerr , 2001 ABCA 152 , 293 AR 384 at para 5 ; Allen at para 16 .

Further, it must reflect the relative strength of the parties’ positions at the time the offer was made and remained open: Allen at para 19 . As noted in Tonizzo v Moysa , 2007 ABQB 379 , [2007] AJ No 701 (QL) at para 23 : “…to qualify as genuine, a Formal Offer must be reasonable and realistic in all the circumstances”. [ 16 ] There is some disagreement in the authorities about whether formal offers to settle must include a compromise to be ‘genuine’: Phillips v Nagy , 2007 ABCA 58 , 404 AR 162 at para 7 .

Some cases from our Court of Appeal suggest that the offer must include a compromise: Labbee at para 13 ; Enron Canada Corp v National-Oilwell Canada Ltd , 2001 ABCA 177 , 281 AR 351 at para

13; Petro-Canada Products Inc. v Dresser-Rand Canada Inc., 2004 ABCA 282, 248 AR 81 at para 4. Others suggest it may not benecessary: Jones v Trans America Life Insurance Co of Canada (1996), 1996 ABCA 165 , 184 AR 120, 39 Alta LR (3d) 1(Alta CA). [17] In Allen, the Court of Appeal directs that offers “must include an element of compromise” (at para 15), but also says that itmay not be a determinative feature concerning genuineness (at para 17): The fact it contains an element of compromise, although necessary and relevant, may not be determinative.

The genuineness of an offermust be assessed as at the time it was served and remained open and its character cannot be decided by simply comparing it to the resultof the trial or appeal. That is only one factor to be considered. Other factors that may be relevant include the amount or nature of thesettlement offer relative to the relief claimed or the judgment at trial, the relationship of the proposed settlement to an objective view ofthe relative merit of the positions of the parties, and the timing of the offer in relation to the commencement of the trial or hearing of theappeal.

None of these factors, or any other single factor, is necessarily conclusive.

An assessment of whether an offer was or was notgenuine requires an examination of all the surrounding circumstances, subjective and objective, existing at the time the offer was servedand remained open, as well as the outcome of the trial or appeal [18] Nominal settlement offers that include a waiver of costs incurred to the date of service may be ‘genuine’ if they adequatelyreflect the relative strength of the parties’ positions at the material time: Carbone v Whidden, 2015 ABCA 255, [2015] AJ No 894 (QL)at paras 36-39; Breitkreuz v Alberta (Minister of Infrastructure), 2016 ABQB 377, [2016] AJ No 765 (QL); Mraz v Herman, 2016ABQB 14, [2016] AJ No 19 (QL) at paras 16-17; Blaze Energy at paras 92-93; SGH v Gorsline, 2001 ABQB 671, 292 AR 329 at para13; Jama v Bobolo, 2002 ABQB 216, 311 AR 362 at para 19. [19] However, nominal offers to waive costs that are made early in the litigation will not be considered to be ‘genuine’ if theofferor could not possibly know the strength of their position at that time.

An example of this scenario is Marathon Canada Ltd vEnron Canada Corp, 2008 ABQB 770, 447 AR 89, where the Plaintiff offered to settle if the Defendant paid the full amount of its claimand discontinued its counterclaim in exchange for the Plaintiff waiving costs. The offer came early in the litigation before questioning,and after only two of twenty-one affidavits of records exchanged. [20] McMahon J ruled that the offeror knew very little about the strength of the offeree’s counterclaim since they had yet tocomplete discovery and questioning.

Accordingly they “could not at that time have realistically expected [the offeree] to abandon itsvery substantial counter-claim without any recognition of its possible merit”: at para 46. [21] In this case, the offer was made very early in the litigation, after the pleadings had been filed but before any affidavits ofrecords were exchanged or questioning undertaken. The component of the offer waiving costs incurred to the date of service represents aconcession of $6500. Weighed only against the value of the Plaintiff’s claim ($1.6 million), it is clearly a “nominal” offer.

The questionis whether Ptarmigan and Imai could reasonably have expected the Plaintiff to accept their nominal offer at such an early stage in thelitigation. [22] In my view, the answer is ‘yes’. As on the appeal, the pleadings are again important. The Statement of Claim recites ascenario which facially discloses the Plaintiff commencing its action seven months after the ultimate limitation period expired, and theStatement of Defense alleges a time-barred action.

It follows that the Plaintiff knew or ought to have known that the ultimate limitationsperiod was expired when it received the offer and that it could only defeat

summary dismissal by establishing fraudulent concealment tosuspend the limitation. Problematically, the Statement of Claim also contains language that clearly defeats the Plaintiff’s ability toestablish fraudulent concealment. [23] In these circumstances, one cannot say the Plaintiff could not possibly have appreciated the strength of its position when theoffer was served.

In turn, Ptarmigan and Imai could reasonably have expected their offer would be accepted, nominal as it was comparedto the stated value of the claim. [24] The timing of the offer does not constitute a special reason to negate the double costs sanction arising from the offer, which Ifind to be ‘genuine’. C.

Does the Term Requiring Discontinuance of Subrogated Claims Change theComplexion of the Offer? [25] The Plaintiff contends that the offer’s requirement to discontinue subrogated claims is unreasonable, and hence a basis fornegating double costs. [26] A subrogated claimant is entitled to the surplus (if any) recovered by a plaintiff, after the plaintiff recovers his losses and theexpenses incurred to make good his loss: Bigl Estate v Alberta (1989), 1989 ABCA 148 , 67 Alta LR (2d) 349 at 353 (CA),citing National Fire Insurance Co v McLaren (1886), 12 OR 682 at 687 (H Ct J (Ch Div)).

It is a derivative right, which means that asubrogated claimant can be in no better position as against a third party than the plaintiff (typically an insured). If the plaintiff’s claimfalls, so too does the subrogated claim: McCourt Cartage Ltd v Fleming Estate (1997), (ON SC), 152 DLR (4th)179 at 182-83 (Ont Ct J (Gen Div)). [27] The term of the offer requiring a release of subrogated claims does not alter its genuineness. V. Disposition [28] Ptarmigan and Imai are entitled to double costs for all litigation steps taken subsequent to the date the offer was served on thePlaintiff, including this application.

Dated at the City of Edmonton, Alberta this 2 nd day of March, 2017. J.E. Topolniski J.C.Q.B.A. Appearances: Rioth Jomha Jomha Skrobot LLP for the Plaintiff Sigurd Delblanc Bryan & Company LLP for the Defendants Ptarmigan Engineering Ltd. and Richard Imai