Gault Estate (Re), 2017 ABQB 182

Court of Queen ’ s Bench of Alberta Citation: Gault Estate (Re), 2017 ABQB 182 Date: 20170316 Docket: 1401 09603 Registry: Calgary Between: James Emsley Thomas Hooton, as Litigation Representative of the Estate of Carol Mary Lascelles Gault Plaintiff/Respondent - and - Sebastian Gault as Trustee for the Estate of Leslie Gault Defendant/Applicant _______________________________________________________ Reasons for Judgment on Costs of the Honourable Mr. Justice Bryan E.

Mahoney _______________________________________________________ Introduction [ 1 ] The parties agree that the successful party to an application is entitled to a costs award against the unsuccessful party, subject to the Court's general discretion: Alberta Rules of Court , AR 124/2010 [ Rules ], r 10.29 and r 10.31. The parties also agree that the

Court's discretion is not absolute and that it must be exercised “judicially and in accordance with established principles”: Lameman vAlberta, 2011 ABQB 532 at para 6; Kent v Law Society of Alberta, 2015 ABQB 432 at para 18 [Kent]. The parties disagree on how theCourt should exercise its discretion in this case to arrive at the appropriate costs award. [2] The Applicant seeks full-indemnity solicitor-client costs of $131,793.90 following its successful application to strike theRespondent’s new action.

In the alternative, the Applicant requests that the Court award it two-thirds solicitor-client costs, whichamounts to $87,866. [3] In support of its position, the Applicant contends that all of the factors set out in Rule 10.33, when applied in this case,favour a costs award beyond the presumptive costs set out in

Schedule C of the Rules. The Applicant further submits that Jackson vTrimac Industries Ltd, (AB KB), 138 AR 161 at para 28 (varied on other grounds (1994), 1994 ABCA 199 ,155 AR 42) [Jackson] sets out a non-exhaustive list of circumstances in which solicitor-client costs are warranted. Based on the factorsin Jackson, the Applicant argues that it is entitled to full-indemnity solicitor-client costs because:

a) The Respondent's conduct of the new action is blameworthy, which is evinced by the Court's finding that the new action was anabuse of process and a violation of the implied undertaking rule;

b) Justice can only be done by awarding solicitor-client costs. Awarding solicitor-client costs is the only way to undo an expense thatwas incurred solely because of the Respondent's improper conduct. The Applicant contends that denying them costs would be akin topunishing it for defending its rights and reputation in the face of a meritless action: see McDonald Estate, Re, 2013 ABQB 602 at para51 for similar reasoning in a contempt action;

c) The new action disclosed no serious issue of law or fact and was contemptuous of the Applicant. The Court struck the new actionfor failing to disclose a cause of action and for breaching Rule 3.74 by improperly reversing the onus;

d) The new action was brought in an attempt to defeat justice and amounts to litigation misconduct. The Respondent's disregard forthe Rules reveals an attempt to defeat justice. Bringing the new action with no reasonable legal basis exemplifies misconduct: Evans vSports Corp, 2011 ABQB 616 at para 12; and

e) Others should be deterred from like conduct. An award for solicitor-client costs in this case would encourage compliance with theRules and respect for the administration of justice. [4] Finally, the Applicant submits that the costs that it seeks ($131,793.90 for an application to strike) are reasonable in thecircumstances. The application to strike the new action: (1) required a full day special; (2) involved a convoluted new action that fellwithin the larger context of a complex matter under case management; and (3) alleged serious wrongdoing and claimed $12,000,000 indamages.

The costs award sought by the Applicant amounts to 1% of the damages claimed in new action. [5] The Respondent requests that the Court award costs on a party-and-party basis on Column 5 of

Schedule C to the Rules,which would amount to $2,100 in this case. In the alternative, the Respondent submits that the appropriate level of costs would be doubleparty-and-party costs on Column 5 of

Schedule C of the Rules, which would amount to $4,200. [6] The Respondent argues that solicitor-client costs should be awarded “only where there has been reprehensible, scandalous oroutrageous conduct on the part of one of the parties”: Young v Young, (SCC), [1993] 4 SCR 3 at 134. It submits this isnot one of the rare and exceptional circumstances in which solicitor-client costs are merited: Jackson at para 28. [7] The Respondent claims that its conduct in the new action is distinguishable from that in Jackson and the cases cited thereinand thereafter. More specifically, it submits as follows:

a) Advancing a claim that fails to disclose a reasonable cause of action does not automatically give rise to an enhanced level of costs.It claims that it had an arguable basis for advancing the causes of action in the new action. In Sidorsky v CFCN CommunicationsLimited, 1997 ABCA 280, at paras 36, 40-41 [Sidorsky], the Court of Appeal found that, although the plaintiff's claim had failed, it wasnot spurious. On this basis, it set aside the award for solicitor-client costs. The Respondent submits that this case is analogous toSidorsky and that party-and-party costs are appropriate;

b) An innocent, as opposed to flagrant and intentional, breach of the implied undertaking rule should not give rise to an enhancedlevel of costs. The Respondent asserts that, in all but one instance, the information it relied upon was within the personal knowledge ofthe Trustee, filed in public documents, or both. In the singular instance that it relied upon information from a transcript, it says that theparties had agreed to file the entire transcript under

Part 6 of the Rules. It was on this basis that the Respondent believed it could rely onthat information. In Kent, Justice Belzil remarked that the breach of the implied undertaking Rule was “intentional and flagrant” andawarded double

Schedule C costs. The Respondent submits that this case is distinguishable from Kent and that basic party-and-partycosts are appropriate; and

c) A finding that a claim is an abuse of process does not automatically attract an enhanced level of costs. On this point, theRespondent makes two submissions: i. The Court found that the new action was duplicative of other ongoing claims. However, theRespondent asserts that the claims advanced in the new action appeared unique enough to justify bringing the new action. It argues thatenhanced costs would not be appropriate in this case given the innocent nature of its conduct; and ii. The Court found that the Respondent undermined the integrity of justice by circumventing Rule 3.74with respect to adding parties.

The Applicant relied on Maynes v Allen-Vanguard Technologies Inc, 2011 ONCA 125 [Maynes] tosupport this proposition. The Respondent has since become aware of two Alberta cases in which the Court held that the choice betweenissuing a new statement of claim and amending an existing statement of claim “is to some extent a judgment call and a matter of strategyfor counsel” and is not “so outside the range of reasonable strategic choices available to counsel as to make it an abuse of process”: Bell

Davidson Insurance Brokers Ltd v Beaton, 2013 ABQB 219 at para 18 [Bell], citing Urban Landmarks Master Builder Inc v LloydsUnderwriters, 2012 ABQB 224 at paras 50 - 52. In Bell, Master Prowse distinguished the Maynes, stating that it is “not in accord withthe Alberta decisions cited above, and is not the practice in Alberta” (at para 26). The Respondent submits that enhanced costs would notbe appropriate given the state of the law in Alberta. [8] The parties' positions in this case are exceedingly disparate.

As always, it is important that I make my decision in accordancewith established principles, mindful of the policy considerations underlying costs awards. [9] An unsuccessful party to litigation usually has to pay a portion of the winning party’s legal costs. Even the successful party,however, is unlikely to recover all of the legal costs incurred.

It is unusual for a court to order full or almost full compensation, calledsolicitor and his/her own client costs. [10] In Jackson, this court stated that for costs to be awarded on a full compensation basis, as opposed to a party-party or partialcompensation basis, the court must conclude that the case fits within exceptional circumstances, examples of which are:

a) blameworthy conduct by a party such as not obeying court orders;

b) a case where complete compensation is the just thing to do and a party should be penalized with a full, rather than a partial,compensation costs order;

c) a party doing something to delay or confuse the process by unnecessary adjournments, concealing relevant records, not admitting factsthat should have been admitted and not producing records or evidence in a timely fashion;

d) a party pursuing trivial or hopeless legal proceedings where an unsuccessful outcome is obvious;

e) conduct that is fraudulent, deceitful or in breach of trust;

f) circumstances where would-be parties should be discouraged from like conduct. [11] In Jacobi v Newell No. 4 (County) (1994), (AB KB), 153 AR 241 (QB) at para 27 [Jacobi], O’Leary Jwrote: A trial judge has a wide discretion when awarding costs among parties to litigation, provided that the discretion is exercised judicially,that is, by the application of established principles: Jackson and Parkview Holdings Ltd. v. Trimac Industries Ltd. (1993), (AB KB), 138 A.R. 161 (Q.B.).

In exercising that discretion, a trial judge must keep in mind the purpose of an award of costs andthe policy considerations involved in setting the level of recovery. These matters were summarized by McDonald, J. in Reese v. Alberta(1992), (AB KB), 5 Alta. L.R. (3d) 40 (Q.B.), at p. 44: While the allocation of costs of a lawsuit is always in the discretion of the court, the exercise of that discretion must be consistent withestablished principles and practice. It is traditionally accepted in Canada's common law provinces that as a general rule the successfulparty recovers its costs from the unsuccessful party.

However, such recovery is normally on a party-and-party basis. That is, the costsrecoverable are those fees fixed for the steps in the proceeding by a

schedule of fees (Sched. C. in Alberta's Rules of Court), plusreasonable disbursements. It is not intended that the successful party receive full indemnification of those fees and disbursements whichit would be charged by its counsel. In England the degree of indemnification appears to be considerably higher than is found in Canada.In almost all jurisdictions of the United States of America the rule is that no costs are recoverable by the successful party. 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. [12] In Jacobi, O’Leary J went on to state at para 30: Costs on an indemnification basis should be awarded only in rare and exceptional cases: Canada Deposit Insurance Corp. v. CanadianCommercial Bank (1987), (AB KB), 50 Alta. L.R. (2d) 1, 76 A.R. 271 (Q.B.). In Jackson et al v.

Trimac IndustriesLtd., et al, supra, Hutchinson J. said at p. 172: In order for costs to be awarded on an indemnity basis or even on a solicitor-client basis, as opposed to a party-party basis, the court mustconclude that the case fits within the parameters of a rare and exceptional or unusual case. [13] This was not a rare and exceptional application where costs on an indemnification basis are justified on the grounds ofcomplexity or novelty.

Nevertheless, it also was not a run of the mill special chambers application. [14] The Applicant was successful in having the Statement of Claim struck out on the basis of abuse of process. The applicant alsosuccessfully argued that the new action was an attempt to circumvent Rule 3.74. Pursuant to Rule 3.74 no party may be added as adefendant after the close of pleadings without leave of the Court where there is no prejudice to the applicant party that cannot beremedied by costs, or an adjournment or by the imposition of terms. The Court struck the new action for: (

a) failing to disclose a cause ofaction; (

b) breaching the implied undertaking rule;(

c) and breaching Rule 3.74. I found the Respondent’s commencement of the newaction was an abuse of process. [15] The Applicant is awarded costs payable forthwith and calculated at one-half of the solicitor-client amount claimed of$131,793.90, thus $65,896.95 plus 5% GST at $3,294.85 totalling $69,191.80. In addition the Applicant will have costs of disbursements

set at $300 plus 5% GST at $15 totalling $315.00. This costs award is inclusive of all costs related to this matter and no further costs are awarded. Heard on the 22 nd day of December, 2016. Dated at the City of Calgary, Alberta this 15 th day of March, 2017. Bryan E. Mahoney J.C.Q.B.A. Appearances: Steven H. Leitl / Aditya M. Badami Norton Rose Fullbright Canada LLP for the Applicant / Defendant Ariel Z. Breitman / Sarah Louw MacPherson Leslie & Tyerman LLP for the Plaintiff / Respondent